Fixed Debenture

Posted in Finance, Accounting and Economics Terms, Total Reads: 552
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Definition: Fixed Debenture

A financial instrument (generally bond or debt) issued against assets that carries a fixed interest rate charge for repayment.


Companies often issue debentures against their assets for funding or capital requirements. A debenture can carry fixed rate or floating rate for the repayments. The floating rates are generally indexed with base rate such as LIBOR or MIBOR (e.g. MIBOR+2%). Sometimes companies prefer to issue debentures with fixed rates if they think the index rates may rise in near future. The repayments of the fixed debenture are in fixed intervals.


Fixed debentures necessitate constraints on the assets or property mortgaged. For example, the company (borrower) may not be able to lease or sell the property to third party without lender’s permission.

 

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