DEFINITION of 'Fixed Debenture'

A note that carries a fixed (as opposed to floating) charge against the issuer's property or assets for repayment. The charge will remain on the company's records until the debenture is repaid. Corporations can issue fixed debentures to finance operations in the same way they issue stock. Fixed debentures can be issued singly or in a series. They pay out a fixed rate of interest at regular intervals.

BREAKING DOWN 'Fixed Debenture'

Fixed charge debentures require restrictions on the underlying property or asset backing the loan to ensure the lenders' security. For example, a company may issue a fixed debenture to obtain a mortgage; the mortgage would most likely preclude the borrower (company) from subletting the mortgaged property to a third party.

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RELATED FAQS
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  2. What are the differences between preference shares and debentures?

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  3. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

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