Introduction
Debentures are a form of debt instrument issued by corporations or governments to raise capital. They are essentially a promise to repay a specified amount of money at a certain date, along with periodic interest payments.
Types of Debentures
- Secured Debentures
- Unsecured Debentures
- Convertible Debentures
- Non-Convertible Debentures
Benefits of Debentures
- Lower cost of borrowing compared to equity
- Interest payments are tax-deductible
- No dilution of ownership
Examples
Company A issues secured debentures to raise funds for a new project. Investors buy these debentures with the expectation of receiving regular interest payments and repayment of the principal at maturity.
Case Studies
In 2018, Company B issued convertible debentures to finance its expansion plans. As the company grew, the value of the debentures increased, providing investors with a good return on investment.
Statistics
According to a recent survey, the global market for debentures is expected to reach $10 trillion by 2025, driven by increasing demand for corporate and government debt securities.
