Classification of debenture finance, Finance Basics

Classification of Debenture Finance

i) Secured Debentures

These are those types of debentures which a company will secure generally in two ways, secured along with a fixed charge or along with a floating charge.

a) Fixed Charge - a debenture is secured with a fixed charge whether it can claim on a particular asset.

b) Floating charge - whether it can claim from any or all of the assets that have not been pledged as securities for any other form of debt.

ii) Naked Debentures

These are not secured via any of the company's assets and as such they are common creditors.

iii) Redeemable Debentures

These are the category of debentures, that the company can buy back after the minimum redemption period and before the maximum redemption period usually 15 years after that holders can force the company to redeem to receivership their capital and interest outstanding.

iv) Irredeemable Debentures as perpetuities

These are never bought back whether case they form permanent source of finance for the company. Although, these are rare and are usually sold via company's along with a history of stable ordinary dividend record.

v) Classification according to convertibility

Convertible debentures - Can be converted into ordinary shares although they can also be converted into preference shares.

Conversion price = par value of a debenture/No. of shares to be received.

Conversion ratio  =  Par value of debenture / Par value of ordinary shares

vi) Non-convertible debentures

These cannot be changed into ordinary preference shares and they are generally redeemable.

vii) Sub-ordinate debentures

Generally last for as long as 10 years and they are sold via financially strong companies.  That are not safe and they rank among general creditors in claiming on assets throughout liquidation.  This means such they are sub-ordinate to senior debt although superior to ordinary and preference share capital.

Posted Date: 1/29/2013 5:22:39 AM | Location : United States







Related Discussions:- Classification of debenture finance, Assignment Help, Ask Question on Classification of debenture finance, Get Answer, Expert's Help, Classification of debenture finance Discussions

Write discussion on Classification of debenture finance
Your posts are moderated
Related Questions
The operating income of H Ltd amounts to Rs. 186000. It pays 35% tax on its income. Its capital structure consists of the following: 14% Debentures

Access to Capital Markets and Ownership Structure  Ownership Structure A dividend policy may be driven with Time Ownership Structure as like in small firms whereas manage

Question: A deferred annuity policy is sold to a life aged 45 with the following benefits: • Basic payments start at $30,000 from age 65, increasing by $2,000 each year; •

We have 10.000 genes and 4.000 of them are annotated for a certain attribute of interest. a. If we have a single set of 10 genes, how many of them should be annotated to be cons

'The most significant function of any Central Bank is to undertake monetary control operations'.   Discuss with specific reference to the Bank of England, highlighting its current

Matching Approach - Financing Current Assets This approach is further referred to as the hedging approach. Beneath this approach, the firm adopts a financial plan that involve

A firm just announced that it will cut its dividend from 4.9 dollars per share to 2.1 dollars per share at the end of this year. The dividend was expected to grow 2.7% every year b

A firm has sales of Rs. 10,00,000. Variable cost is 70%, total cost is Rs.9,00,000 and Debt of Rs. 5,00,000 at 10% rate of interest. If tax rate is 40% calculate:

Source of Finance for the Sole Proprietor Some sources of capital---Discuss a) Savings b) Assistance from friends or relatives c) Proceeds from sale of assets d) Ba

Setting a Reorder Point - ROP  Once the order quantity has been determined, the next question to be settled is when to place the order. If an order is released and it takes th