Legal Definitions - debenture bond

A debenture bond is a type of bond that is not secured by any specific asset, but rather by the general credit and financial reputation of the corporate issuer. It is an instrument that acknowledges a debt owed by the issuer to the bondholder.

For example, if a company issues a debenture bond, it is essentially borrowing money from investors and promising to pay it back with interest. However, unlike a secured bond, which is backed by a specific asset, such as property or equipment, a debenture bond is not backed by any collateral.

There are different types of debenture bonds, such as:

• Convertible debenture: a debenture that can be converted into another security, such as stock.
• Sinking-fund debenture: a debenture that is secured by periodic payments into a fund established to retire long-term debt.
• Subordinate debenture: a debenture that is subject to the prior payment of ordinary debentures and other indebtedness.

Overall, a debenture bond is a way for companies to raise capital without having to put up any specific assets as collateral. However, because it is not secured by any specific asset, it is generally considered to be a riskier investment than a secured bond.