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Im asking this question just for general knowledge
1. most information from internet says that bond is secured, but are there unsecured bond ?
2. Most information from internet says that debenture is unsecured, but are there secured debenture ?
3. For bond i knos that its backed by an asset which means if a company defaults paying interest n principal, the ownership of collateralized asset is be passed to the bondholder.
then for example if i bought a bond from a company( for example) and if they default for paying interest to me, collateralized asset will be sold and ill have a certain percentage of that asset ?As I say in my lectures, bonds and debentures are different names for the same thing – they are exactly the same.
It is common for them to be secured on assets, but they certainly do not have to be secured. Unsecured bonds will pay higher interest because there is more risk for the lenders.
If a company goes into liquidation (which might happen because they default on the interest, but does not have to happen – they might come to an arrangement with the lenders) then the secured lenders have first call on the proceeds from the assets on which the loan is secured. If the proceeds are sufficient then the lenders get repaid in full. If the proceeds are not sufficient, then they get all the proceeds and as to whether they get the rest of what they are owed depends on how much other money is available to pay out all the liabilities.
1. Then since bonds and debentures are same, we can say that convertible bond issue and convertible debenture issue are same ?
2. In islamic finance, what’s the difference between asset based and asset backed in Sukuk? Its a bit hard to comprehend
3. What is it mean by underwrite?
1. Yes.
2. The distinction is unlikely to be relevant for the exam, but is explained well in the following article:
https://www.accaglobal.com/ubcs/en/student/exam-support-resources/professional-exams-study-resources/p4/technical-articles/islamic-finance—theory-and-practical-use-of-sukuk-bonds.html3. When a company is issuing new shares, there is obviously the risk that they might not be able to sell them all. It is therefore common for the company to pay an underwriter – the underwriter promises to buy any shares that are not sold to the public. So the company is then certain to receive all the money. (It is like buying insurance)
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