Types of Debentures

Types of debentures:

1. Simple naked or unsecured debentures: - 

                              These debentures are not given any security on assets. They have no priority as compared to other creditors.
2.  Secured or mortgage debentures: -  

                              The se debentures are given a security on assets of the debentures company. In case of default in the payment of interest or principle amount, debenture holders can sell the assets in order to satisfy their claims.
3.  Bearer debentures: - 

                               These debentures are easily transferable. They are just like negotiable instruments. The debenture is handed over to the purchaser without any registration deed.
4.  Registered debentures: - 

                               As compared to bearer debenture which is transferred by mere delivery, registered debenture require a procedure to be followed for the transfer.
5.  Redeemable debenture: - 

                               These debentures are to be redeemed on the expiry of ascertain period. The interest on the debenture is paid periodically but the principle amount is returned after a fixed period.
6. Irredeemable debentures:-  

                               Such debentures are not redeemable during the life time of the company. There are payable either on the winding up of the company or at the time of any default on the part of the company.
7.  Convertible debenture: - 

                               Sometimes convertible debenture is issued by a company and the debenture holders are given an option to exchange the debenture into enquiry shared after the lapse of a specified periods.

8. Non-convertible debentures:- 

                                Non-convertible debentures do not confer any option on the holder to convert the debentures into equity shares and are redeemed at the expiry of specific period. these non-convertible debentures carry higher interest rate than other types of debentures because of the non-attractive feature of non-convertibility into other form of stocks.

9. Subordinate debentures: 

                                It is an unsecured debt, which is junior to all other debts. this types of debt will have a higher interest rate than senior debt and will frequently have rights of conversion into ordinary shares. subordinated debt is often called mezzanine finance because it ranks between equity and debt.

10. Guaranteed debentures: 

                                 Some business are able to raise long-term money because their debts are guaranteed, usually by their parent companies. in some instance, the governement guarantee the bonds issued by their undertakings and corporations like electricity supply board, irrigation corporaton, etc.

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