What is the difference between a debenture and a subordinated debenture?
A debenture is a type of bond that does not use collateral. It’s otherwise recognized as any unsecured long-term debt. A subordinated debenture is similar in character however in this case they are payed as a subordinate issue.
What is subordination in bond?
What are subordinated bonds? Subordination means that the investor’s claims of a subordinated bond will be settled only after all non-subordinated debt securities (such as covered bonds, non-subordinated / senior bonds) have been settled.
Are subordinated debenture secured?
Subordinated Debenture Bond A class of unsecured bond that, in the event of liquidation, is prioritized lower than other classes of debt. In essence, a subordinated debenture bond is an unsecured loan, which has no collateral.
What are the differences between a debenture a mortgage bond and a subordinated debenture?
The main difference between mortgage bonds and debenture bonds is collateral. The mortgage bond is collateralized by something that has value and can be sold to pay the bondholders if the company defaults on payment of that bond or goes through bankruptcy. Debentures have no such collateralization.
Is revolver a subordinated debt?
A revolver is a form of senior bank debt that acts like a credit card for companies and is generally used to help fund a company’s working capital needs. The interest rate charged on the revolver balance is usually LIBOR plus a premium that depends on the credit characteristics of the borrowing company.
What is the meaning of convertible debentures?
A convertible debenture is a type of long-term debt issued by a company that can be converted into shares of equity stock after a specified period. Convertible debentures are usually unsecured bonds or loans, often with no underlying collateral backing up the debt.
What is meaning of subordinated?
1 : placed in or occupying a lower class, rank, or position : inferior a subordinate officer. 2 : submissive to or controlled by authority. 3a : of, relating to, or constituting a clause that functions as a noun, adjective, or adverb. b : subordinating. subordinate.
What is a subordinated creditor?
More Definitions of Subordinated Creditors Subordinated Creditors means every Person now or in the future who agrees to subordinate indebtedness of the Borrower held by that Person to the payment of the Indebtedness.
Why do companies issue subordinated debt?
Banks issue subordinated debt for various reasons, including shoring up capital, funding investments in technology, acquisitions or other opportunities, and replacing higher-cost capital. In the current low interest rate environment, subordinated debt can be relatively inexpensive capital.
What is subordinated debt example?
Subordinated debt is any debt that falls under, or behind, senior debt. Examples of subordinated debt include mezzanine debt, which is debt that also includes an investment. Additionally, asset-backed securities generally have a subordinated feature, where some tranches are considered subordinate to senior tranches.
What are transactors and revolvers?
Transactors don’t generate any revenue for the credit card issuers as they don’t pay a late fee or interest. The opposite of transactors is the revolvers who carry forward credit cards from a month to the next month.
What is fully and partly convertible debentures?
Partially convertible debentures (PCDs) involve redeeming a fraction of the value of the security for cash and converting the other part into equity. A fully convertible debenture (FCD) involves a full conversion of the debt security into equity at the issuer’s notice.