Issue of Debentures

A debenture is a type of loan stock issued by a company where a company will indicate the amount borrowed and the amount of interest that will be paid on the debentures. There are different types of debentures

Secured Debentures
This is where the company which is issuing the debentures will provide assets as security. Secured debentures can be broadly derived in to two as

Floating Charge
This is where the company will keep all the assets as security when issuing the debentures

Fixed Charge
This is where a specific asset will be kept as security when issuing the debentures

Unsecured Debentures
This is where a company will issue debentures without providing assets as security. The investors will be taking a higher risk in buying unsecured debentures. Based on the method of paying interest, debentures can be divided into two

Floating Rate of Debentures
Floating rate debentures will be issued where the rate of interest to be paid will be linked to generally LIBOR (London Inter Bank Offered Rate) which is the rate of interest at which the commercial banks will borrow from one another

Fixed Rate of Debentures
If debentures are issued at fixed rate debentures, then the company will specified the rate of interest that will be paid at the time of issuing the debentures