Debenture vs. Indenture — What's the Difference?

Issued by companies to raise capital, not backed by collateral.

Outlines terms and conditions of a bond issue.

Typically offers fixed returns to investors.

Designed to safeguard the rights of bondholders and issuers.

Investors depend on the issuer's financial stability.

Includes interest rates, repayment terms, and covenants.

Offers potential returns based on issuer's performance.

Ensures clarity and legality in bond issuance.

Used by corporations for funding expansion or operational needs.

A standard document in bond issuances worldwide.

In corporate finance, a debenture is a medium- to long-term debt instrument used by large companies to borrow money, at a fixed rate of interest. The legal term "debenture" originally referred to a document that either creates a debt or acknowledges it, but in some countries the term is now used interchangeably with bond, loan stock or note.

An indenture is a legal contract that reflects or covers a debt or purchase obligation. It specifically refers to two types of practices: in historical usage, an indentured servant status, and in modern usage, it is an instrument used for commercial debt or real estate transaction.

A certificate or voucher acknowledging a debt.

Often indentures A contract binding one party into the service of another for a specified term.

An unsecured bond issued by a civil or governmental corporation or agency and backed only by the credit standing of the issuer.

A deed executed by more than one party.

A customhouse certificate providing for the payment of a drawback.

An instrument or agreement specifying the terms of a bond or trust.

A certificate that certifies an amount of money owed to someone; a certificate of indebtedness.

A document separated into portions so as to create indentations that allow the holders of the separate portions to match up in order to confirm authenticity.

(obsolete) A certificate of a loan made to the government; a government bond.

To bind into the service of another by indenture.

A type of debt instrument secured only by the general credit or promise to pay of the issuer, not involving any physical assets or collateral, now commonly issued by large, well established corporations with adequate credit ratings.

(legal) A contract which binds a person to work for another, under specified conditions, for a specified time (often as an apprentice).

A document granting lenders a charge over a borrower’s physical assets, giving them a means to collect a debt, as part of a secured loan.

A document, written as duplicates separated by indentations, specifying such a contract.

A writing acknowledging a debt; a writing or certificate signed by a public officer, as evidence of a debt due to some person; the sum thus due.

An indentation; a recess.

A customhouse certificate entitling an exporter of imported goods to a drawback of duties paid on their importation.

(legal) To bind a person under such a contract.

Any of various instruments issued, esp. by corporations, as evidences of debt. Such instruments (often called debenture bonds) are generally, through not necessarily, under seal, and are usually secured by a mortgage or other charge upon property; they may be registered or unregistered. A debenture secured by a mortgage on specific property is called a mortgage debenture; one secured by a floating charge (which see), a floating debenture; one not secured by any charge a naked debenture. In general the term debenture in British usage designates any security issued by companies other than their shares, including, therefore, what are in the United States commonly called bonds. When used in the United States debenture generally designates an instrument secured by a floating charge junior to other charges secured by fixed mortgages, or, specif., one of a series of securities secured by a group of securities held in trust for the benefit of the debenture holders.

To indent; to make hollows, notches, or wrinkles in; to furrow.

A bond that is backed by the credit of the issuer but not by any specific collateral

The act of indenting, or state of being indented.

A certificate or voucher acknowledging a debt

A mutual agreement in writing between two or more parties, whereof each party has usually a counterpart or duplicate, sometimes with the edges indented for purpose of identification; sometimes in the pl., a short form for indentures of apprenticeship, the contract by which a youth is bound apprentice to a master.

A contract by which anyone is bound to service.

To indent; to make hollows, notches, or wrinkles in; to furrow.

To bind by indentures or written contract; as, to indenture an apprentice.

To run or wind in and out; to be cut or notched; to indent.

A concave cut into a surface or edge (as in a coastline)

Formal agreement between the issuer of bonds and the bondholders as to terms of the debt

A contract binding one party into the service of another for a specified term

The space left between the margin and the start of an indented line

Bind by or as if by indentures, as of an apprentice or servant;

While traditionally unsecured, in some regions like the UK, the term debenture can also refer to secured debt instruments.

A debenture is an unsecured debt instrument issued by companies to raise capital, relying on the issuer's creditworthiness rather than collateral.

An indenture protects bondholders by legally binding the issuer to the terms outlined in the document, including repayment terms and covenants.

An indenture includes detailed terms of a bond issue, such as interest rates, repayment schedule, covenants, and rights and obligations of the parties involved.

A bond is a broader term that can include secured and unsecured debt securities, while a debenture specifically refers to an unsecured bond in many jurisdictions.

Typically, debentures are issued by corporations and government entities, not individuals.

Debentures can be a good investment for those seeking fixed-income securities, but they carry a higher risk due to the lack of collateral.

Indentures are used by bond issuers and bondholders to outline and agree upon the terms of a bond issue.

Most formal bond issues involve an indenture to ensure legal clarity and protection for all parties involved.

Investors can evaluate debentures based on the issuer's credit rating, the debenture's interest rate, and the terms outlined in any associated indenture.

In the event of a default, debenture holders are considered unsecured creditors and may not recover their investment fully.

Indentures are primarily associated with bond issues, though similar agreements can be used for other types of debt.

The risks include the issuer's default risk, interest rate risk, and the lack of collateral in case of default.

Debenture interest rates are influenced by the issuer's credit rating, market conditions, and the term of the debenture.