Debenture

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In finance, a debenture is a long-term debt instrument used by governments and large companies to obtain funds. It is similar to a bond except the securitization conditions are different. A debenture is unsecured in the sense that there are no liens or pledges on specific assets. It is however, secured by all properties not otherwise pledged. In the case of bankruptcy debenture holders are considered general creditors.

The advantage of debentures to the issuer is they leave specific assets unencumbered, and thereby leave them open for subsequent financing.

In practice the distinction between bond and debenture is not always maintained. Bonds are sometimes called debentures and vice-versa.

Contents 1 Subordinated debenture 2 Debenture holders 3 See also 3.1 Finding related topics

Subordinated debenture

A specific type of debenture is the subordinated debenture. In the event of liquidation, these debentures are subordinated to designated debt obligations, typically bank loans or notes payable. That is, the debenture holders will not get paid until the senior debt, named in the debenture, have been paid.

Debenture holders

In the United Kingdom debentures have frequently been used as a mechanism for raising funds to build or finance sports or leisure venues. Often these debentures pay little or no interest, but entitle the holder to privileges tickets for the venue. For example, the All England Lawn Tennis and Croquet Club first issued debentures in 1920 in order to purchase the current premises in Wimbledon, and debenture issues take place every five years. The 2001-2005 debenture issue was priced at £2,000 each, with an additional premium of £18,000, and Value Added Tax of £3,150; holders of these debentures are entitled to a free seat in the Centre Court Stand for each day of the championships for five years, and have access to exclusive lounge and catering facilities. At the Royal Albert Hall debenture holders are known as members; they own rights to individual boxes, and are entititled to view almost all performances. In 2003 Box 70 was offered on the open market for £250,000 [1]. Other stadia financed through the issue of debentures include Millennium Stadium, Wembley Stadium, Arsenal, Twickenham Stadium and Trent Bridge in Nottingham.

See also

• Floating charge
• Security interest
• Bond (finance)
• Finance
• Gold exchange-traded fund

Finding related topics

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• list of business ethics, political economy, and philosophy of business topics
• list of business theorists
• list of economists
• list of corporate leaders
• list of companiesde:Schuldverschreibung

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