After whom do debenture holders receive their payments or bond yields___________?
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Answer: B. secured debt holders
Explanation
Debenture bonds lack specific collateral backing, making them legally subordinate to secured debt issues. Secured debt holders possess direct legal claims against specific corporate assets in liquidation events. Consequently, debenture holders receive their principal and interest payments only after secured creditors are satisfied. Debentures rely entirely on the general creditworthiness and earning power of the issuing corporation. Secured debt is backed by pledged physical assets like real estate, equipment, or inventory. Priority of claims determines the exact order of payouts during corporate bankruptcy restructuring proceedings.
Corporate treasurers issue debentures when they lack available unencumbered assets to pledge as collateral. Credit rating agencies assign lower grades to unsecured debentures compared to senior secured corporate bonds. Institutional investors demand higher coupon yields on debentures to compensate for lower liquidation priority. Registered debt holders describe ownership recording methods rather than liquidation priority status. Unsecured debt holders is synonymous with debenture holders, who both rank behind secured creditors. Unregistered debt holders refer to bearer bonds which are largely obsolete in modern financial markets.
- Subject
- Accounting and Finance
- Category
- Finance
- Topic
- —
- Difficulty
- medium
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