debenture

debenture (duben'chur) [key], document acknowledging indebtedness. In Great Britain a debenture is practically the same as a bond, and debenture stock is similar to preferred stock. In the United States the term is usually employed for a corporation certificate without special security, such as a mortgage, to back it up. Debentures are generally issued by service corporations that have few mortgageable assets, or by blue-chip companies that are stable enough to invite unsecured loans. In a typical debenture, the corporation promises to repay the principal either periodically or on a specified date, and with regular interest. The term is also used for a document by which a government is bound to pay a creditor money due after some condition has been fulfilled.

The Columbia Electronic Encyclopedia, 6th ed. Copyright © 2007, Columbia University Press. All rights reserved.

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