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
(a) RBC has 100 loans outstanding, each for $1 million, which it expects to be repaid today.  Each loan has a 5% probability of default, in which case the bank is not repaid anythi


Contribution Margin The Average of the industry Contribution Margin (CM) was 15.40% for 2004, 14.39% for 2005, and 13.18% for 2006. The chart showed that Contribution Mar

What is the effective annual cost of skipping the discount and paying at the end of the net period for the following credit terms: 6/10, net 70? please show work"

Primary Markets - Financial Markets These are markets such deal along with securities that have been issued for the first moment. The money flows directly from transferor or t

Present Value of a Lump Sum - DCF Technique Generally an investor would want to know how much he or she would stop currently to get a provided amount in year 1, 2, ... n.  In

Define the term- Origination Origination offers to the work of investigation, analysis and processing of new project proposals. Origination starts before an issue is really

Oogenesis - Gametogenesis The maturing procedure in oogenesis leading to the formation of ovum begins before birth but is not completed until after puberty. The primary oocyte


Ask lajgkjasbgksabgbaskjbaskjbasjgbhjabgjbjgbskjgbkasbgjkabksgbksbgkabkhvakkvbaoygfyabkbkkye#Minimum 100 words accepted#