Debênture

A debenture is a type of debt instrument that is not secured by physical assets or collateral. Instead, debentures are backed by the general creditworthiness and reputation of the issuer. Companies and governments commonly issue debentures to raise capital. Investors who purchase debentures are essentially lending money to the issuer, and in return, they receive periodic interest payments and the return of the principal amount on the maturity date.

The risk associated with debentures depends on the financial stability and credit rating of the issuer. Higher credit ratings generally indicate lower risk, and therefore, these debentures may offer lower interest rates. Conversely, lower credit ratings suggest higher risk, which typically translates into higher interest rates to compensate investors for the increased potential for default. Debentures can have various maturities, ranging from short-term to long-term. They are a popular investment vehicle for institutional investors and individuals seeking income. The absence of collateral means that if the issuer defaults, debenture holders rank below secured creditors in terms of repayment priority. However, they still have a claim on the issuer's assets before equity holders.