Debenture

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DEFINITION of 'Debenture'

A type of debt instrument that is not secured by physical assets or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital. Like other types of bonds, debentures are documented in an indenture.

INVESTOPEDIA EXPLAINS 'Debenture'

Debentures have no collateral. Bond buyers generally purchase debentures based on the belief that the bond issuer is unlikely to default on the repayment. An example of a government debenture would be any government-issued Treasury bond (T-bond) or Treasury bill (T-bill). T-bonds and T-bills are generally considered risk free because governments, at worst, can print off more money or raise taxes to pay these type of debts.

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  2. How risky is it to enter into a debenture agreement?

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  3. How is a debenture stock different from a regular debenture?

    Private businesses and governments sometimes issue debt securities to raise additional capital. These debt instruments are ... Read Full Answer >>
  4. What is the difference between nonconvertible debentures and fixed deposits?

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  5. Which securities are considered investment grade?

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  6. When should a company consider issuing a corporate bond vs. issuing stock?

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