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Simple English definitions for legal terms
plain bond
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A quick definition of plain bond:
A plain bond, also known as a debenture, is a type of debt that is not secured by any specific asset. It is backed only by the general credit and financial reputation of the issuer, usually a corporation. This means that if the issuer defaults on the debt, the bondholders have no claim to any specific property or assets. Debentures can come in different forms, such as convertible debentures that can be changed into stock, sinking-fund debentures that are secured by payments into a fund, and subordinate debentures that are subject to other debts. In English law, a debenture can also refer to a company's security for a monetary loan, usually creating a charge on company stock or property.
A more thorough explanation:
A plain bond, also known as a debenture, is a type of debt instrument that is not secured by any specific asset. It is backed only by the general credit and financial reputation of the corporate issuer. This means that if the issuer defaults on the bond, the bondholders have no claim on any specific assets of the company.
For example, if a company issues a plain bond for $1,000, the bondholders are owed $1,000 plus interest. However, if the company goes bankrupt and cannot pay back the bond, the bondholders cannot claim any specific assets of the company to recover their money.
Plain bonds are often used by companies to raise capital for various purposes, such as expanding their business or funding new projects. They are typically issued with a fixed interest rate and a maturity date, at which point the company must repay the principal amount of the bond.
Convertible debentures are a type of plain bond that can be converted into another security, such as stock. Sinking-fund debentures are secured by periodic payments into a fund established to retire long-term debt. Subordinate debentures are subject to the prior payment of ordinary debentures and other indebtedness.