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 two problems below (P1 and P2). Five marks each. Part marks will be allocated, but if you have the incorrect answer then you cannot expect to get more than half marks. Project

What role do primary financial markets play in our economy? What role do secondary markets fill? Describe the relationship that exists between financial institutions and financial

State the Classification of New Issue Market New market can be categorized as: (i) A market where firms go to the public for the first time through initial public offerin

Y ou are interested in the value of Joes Shoe Corporation and its cost of capital. Suppose you believe that the assumptions of Miller-Modigliani's Proposition 1 (without taxes) are

Advantages of Development Financial Institutions Advantages or Functions or can say Case for Development Financial Institutions 1. They grant venture capital 2. They gra

Routine functions - Finance Function For the effective execution of the managerial finance functions, schedule functions have to be performed.  These decisions relate systems

You are taking an investment in the common stock of Crisp's Cookware. The stock is expected to pay a dividend of $2.00 a share at the end of the year (D1=2.00). The stock has a bet

Sources of Funds - Finance Venture capital, with combining risk financing along with marketing assistance and management, could become an effective instrument in fostering dev

Baumol's Model - Optimal Cash Balance An application of the EOQ is the Baumol's model which is inventory model to cash management. Its statements are as: The firm emplo

The topic taken for this study is "FINANCIAL VIABILITY OF X BY APPLYING CREDIT SCORE MODEL".  The study has attempted to analyze the financial viability of the company by applyi