What is Debenture Stock?
Debenture stock is a form of investment that is somewhat like preferred stock. With a debenture stock offering, the terms and conditions that govern the stock issue include a schedule for making payments to the investor at regular intervals. From this perspective, debenture stock functions more like any type of debenture rather than like other forms of stock. One of the keys to understanding how debenture stock functions is to realize that the stock offering is treated as equity rather than debt. This is the factor that tends to make the stock more like other forms of stock and less like a debenture. The classification of debenture stock also establishes a degree of protection for investors in the event the company shuts down and the assets of the corporation go through a liquidation process. With debenture stock, investors receive payments that are issued on a specific schedule. The schedule remains in effect for as long as the investor holds on to shares of the stock. Depending on th
Debenture stock is a form of fixed interest security issued by specialist finance companies, authorised to raise funds from the investing public for onlending to carefully selected borrowers, both for corporate and private purposes. By governing legislation, an independent trustee is appointed to monitor and act in the interests of the debenture stock holders should the finance company fall outside its prescribed operating limits and financial ratios. Trustee powers extend to demanding immediate repayment of debenture stock capital and even placing the issuing company in receivership if necessary, to maintain security of investment for the debenture stockholders. First ranking secured debenture stock carries a floating charge across all the assets of the issuing finance company (subject to minor permitted priority charges) and therefore constitutes senior debt of the issuing company, ranking ahead of ordinary shares and unsecured creditors in priority for repayment in the event of a co
