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Simple English definitions for legal terms
debenture indenture
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A quick definition of debenture indenture:
A debenture indenture is a legal agreement that outlines the terms and conditions of a long-term loan. Unlike a mortgage or other collateral, the loan is not secured by any assets. This means that if the borrower defaults on the loan, the lender cannot seize any property to recover their money. However, the debenture holder is still in a similar position to a bondholder who is secured by a first mortgage. Essentially, it is a way for companies to borrow money over a long period of time without having to put up any assets as collateral.
A more thorough explanation:
A debenture indenture is a legal document that outlines the terms and conditions of a long-term loan that is not secured by any collateral. This means that the lender does not have any claim to specific assets of the borrower in case of default. Instead, the lender relies on the creditworthiness of the borrower to repay the loan.
For example, a company may issue debentures to raise funds for expansion or other business purposes. The debenture indenture will specify the interest rate, repayment schedule, and other terms of the loan. The debenture holders will have the right to receive interest payments and principal repayment according to the terms of the indenture.
Unlike secured loans, debentures are not backed by any specific assets of the borrower. This means that if the borrower defaults on the loan, the debenture holders will not have any claim to the borrower's assets. However, debentures are still considered a relatively safe investment because they are usually issued by companies with a good credit rating and a solid financial track record.