Happy Learning!!
A debenture or bond is a type of security issued by a co-operation. Debentures have a fixed rate of return, fixed maturity period and income certainty. Moreover, the risk of capital losses is low. Debentures may be secured (by the tangible assets of the company) or unsecured (secured only by the general creditworthiness of the company). The types of debentures are given as follows:
Registered Bond: Dues are payable only to the owner who is specified in the book of the issuer.
Bearer Bonds: Dues are payable to whoever has been endorsed and possesses the bond.
Non-Convertible Bonds: These debentures have a buy-back facility after an initial lock in period. These debentures are fully secured and can be redeemed typically at 105% of the par value. They enjoy tax friendly interest payments on a quarterly or half yearly basis.
Convertible Debentures: These types of debentures can be converted at the option of the holder into ordinary shares of the same company subject to specified terms and conditions.
Partly Convertible Debentures: These debentures have a shorter maturity period, typically for 5 years. The issuing company provides a buy-back facility for the non-convertible portion at the option of the investor.
Callable Bonds: These bonds have a repurchase provision which is advantageous to the issuer. The other option is the buyback facility-bay which is advantageous to the subscriber. The buy-back provision makes the bonds as 'puttable bonds' and enhances the liquidity of the bonds.
Zero-coupon Bonds: Also known as 'deep discount bonds' these bonds do not have a specific interest payment every year. Instead, zero coupon bonds are purchased at a substantial discount. The difference between the face value and purchase price is treated as capital gains which have favorable tax rates. Therefore, these bonds are advantageous for investors.
Sinking fund Bonds: These types of bonds are partially redeemed by the issuer every year so that only a small portion of the principal remains to be redeemed at maturity.
Junk-bonds: These types of bonds have been created and used in the USA during the 1980's. The features include high risk, high yield and low rating. These types of bonds are issued by co-operations in connection with mergers, leveraged buyouts and stock buybacks.
A debenture or bond is a type of security issued by a co-operation. Debentures have a fixed rate of return, fixed maturity period and income certainty. Moreover, the risk of capital losses is low. Debentures may be secured (by the tangible assets of the company) or unsecured (secured only by the general creditworthiness of the company). The types of debentures are given as follows:
Registered Bond: Dues are payable only to the owner who is specified in the book of the issuer.
Bearer Bonds: Dues are payable to whoever has been endorsed and possesses the bond.
Non-Convertible Bonds: These debentures have a buy-back facility after an initial lock in period. These debentures are fully secured and can be redeemed typically at 105% of the par value. They enjoy tax friendly interest payments on a quarterly or half yearly basis.
Convertible Debentures: These types of debentures can be converted at the option of the holder into ordinary shares of the same company subject to specified terms and conditions.
Partly Convertible Debentures: These debentures have a shorter maturity period, typically for 5 years. The issuing company provides a buy-back facility for the non-convertible portion at the option of the investor.
Callable Bonds: These bonds have a repurchase provision which is advantageous to the issuer. The other option is the buyback facility-bay which is advantageous to the subscriber. The buy-back provision makes the bonds as 'puttable bonds' and enhances the liquidity of the bonds.
Zero-coupon Bonds: Also known as 'deep discount bonds' these bonds do not have a specific interest payment every year. Instead, zero coupon bonds are purchased at a substantial discount. The difference between the face value and purchase price is treated as capital gains which have favorable tax rates. Therefore, these bonds are advantageous for investors.
Sinking fund Bonds: These types of bonds are partially redeemed by the issuer every year so that only a small portion of the principal remains to be redeemed at maturity.
Junk-bonds: These types of bonds have been created and used in the USA during the 1980's. The features include high risk, high yield and low rating. These types of bonds are issued by co-operations in connection with mergers, leveraged buyouts and stock buybacks.
No comments:
Post a Comment