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Debenture

An unsecured promise to pay, backed only by the general credit of the issuer.  Debentures and corporate bonds carry a written agreement (indenture) that specifies the terms and conditions under which the debentures are written.

When an investor purchases a debenture, he is literally lending money to the issuer, and must count on the issuer to deliver the return of the invested funds ,with or without interest depending on the indenture, as promised.

Convertible debentures can be exchanged for common stock at a set price, such as a certain number of stock shares.

This means that the debenture is only as good as the person who wrote it.  If a debenture is issued by a large corporation, then perhaps it can be converted into stock, depending on the nature of the conditions of the debenture.  A debenture offer must be examined very, very carefully.  All possible research must be conducted on the background and financial history of the issuer.

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