Whats the difference between Debentures, Dividends and Loan stock?

shelley83 Registered Posts: 6 Regular contributor ⭐ ? ⭐


  • peugeot
    peugeot Registered Posts: 624
    A 'debenture' is a long term debt which is only loosely secured. In other words it is not secured over any specific asset e.g. a building. If the company defaults on the loan, the debenture holder may sell any part of the company's property that have not already been pledged.
    Dividends are distributions of profit to shareholders (after tax profits).

    With loan stock, there are generally two kinds:

    'Unsecured' loan stock occurs where a company receives a loan which is not secured. Therefore if the company defaults on a loan, the creditor has no right to the company's property as repayment.

    'Convertible' loan stock is where the company receives a loan at a preferential rate of interest (usually quite low). The creditor has the ability to convert the loan into actual shares in the company.

    Kind regards
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