DEBENTURE

debenture (di-ben-ch<<schwa>>r). [fr. L. debentur “there are owed”] 1. A debt secured only

by the debtor’s earning  power, not by a lien on any specific asset. • Originally, this was the  first

word of a deed detailing sums acknowledged to be owed. 2. An instrument acknowledging such a

debt. 3. A bond that is backed only by the general credit and financial reputation of the corporate

issuer, not by a lien on corporate assets. — Also termed debenture bond; unsecured bond; naked

debenture;  plain  bond.  Cf.  BOND(3).  [Cases:  Corporations    470.  C.J.S.  Corporations  §§

664–665.]

“The  word  ‘debenture’  in  its  archaic  sense  was  applied  to  a  form  given  under  seal  as  an

acknowledgment for goods supplied to the Royal Household, and as such probably meant a charge

on Public Funds. The term was further applied to drawback certificates issued for repayment, on

the exportation of goods, of duty which had already been paid upon them, and this term is still so

used   by   H.M.   Customs….   The   word   is   now,   however,   generally   used   to   indicate   an

acknowledgment  of  indebtedness  given  under  seal  by  an  incorporated  company,  containing  a

charge  on  assets  of  the  company,  and  carrying an  agreed  rate  of  interest  until  payment,  but  the

variety  of  the  forms  which  a  debenture  may  take  makes  it  difficult  to  find  a  good  general

definition  in  any  reported  case.”  Thomas  Froude  &  Eric  V.E.  White,  The  Practice  Relating  to

Debentures 1 (1935).

convertible  debenture.A  debenture  that  the  holder  may  change  or  convert  into  some  other

security, such as stock. [Cases: Corporations    473. C.J.S. Corporations § 670.]

convertible subordinated debenture.A debenture that is subordinate to another debt but can be

converted into a different security.

sinking-fund  debenture.A  debenture  that  is  secured  by  periodic  payments  into  a  fund

established to retire long-term debt.

subordinate debenture.A debenture that is subject to the prior payment of ordinary debentures

and other indebtedness.

 

4.English law. A company’s security for a monetary loan. • The security usu. creates a charge

on company stock or property. 5. A customhouse certificate providing for a refund of the duties on

imported  goods  when  the  importer  reexports  the  goods  rather  than  selling  them  in  the  country

where they were imported.

DEBENTURE BOND

debenture bond.See DEBENTURE(3).

DEBENTURE INDENTURE

debenture indenture.An indenture containing obligations not secured by a mortgage or other

collateral. • It is a long-term financing vehicle that places the debenture holder in substantially the

same position as a bondholder secured by a first mortgage.

DEBENTURE STOCK

debenture  stock.  1.  Stock  that  is  issued  under  a  contract  providing  for  periodic,  fixed

payments. [Cases: Corporations    470. C.J.S. Corporations §§ 664–665.] 2.English law. A type of

bond  representing  money  borrowed  by  a  company  using  its  property  or  other  fixed  assets  as

security. [Blacks Law 8th]