Secured bonds get paid first before unsecured debentures during a company’s liquidation or bankruptcy. |
Secured vs Unsecured Debentures
Convertible vs Non-convertible Debentures
Redeemable vs Irredeemable (Perpetual)
| Basis | Debentures | Bonds |
|---|---|---|
| Meaning | Debt instruments generally issued by companies to raise long term funds. | Debt instruments typically issued by governments, government-backed institutions, or large public sector entities. |
| Issuers | Primarily companies and financial institutions. | Governments, government agencies, and companies. |
| Interest | Usually offers higher interest rates to compensate for higher risk | May offer lower interest rates, especially for government bonds, due to lower risk |
| Collateral | Generally unsecured (no collateral) and backed by the issuer's creditworthiness. | Often secured by specific assets or government guarantees |
| Risk | Higher risk as they may not be backed by collateral | Lower credit risk, especially on government bonds. |
1. What is a debenture?
A debenture is a debt instrument commonly issued by a company to raise borrowed capital. Its holder is a creditor of the company rather than an owner.
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