Debentures are a type of Debt Instrument, similar to a Bond, that companies issue in order to raise capital. Details of Debentures are documented in an indenture, which is a written agreement between the issuer and the holder. Companies pay investors interest for the term of the Debenture. At the end of the lending period, issuing companies usually offer the choice of converting the Debentures into Shares. Debentures are not secured by physical assets or collateral. Investors can buy and sell Debentures through a JSE equity market member.
Investors who are looking for a fixed income derived from interest which is unrelated to the issuing company’s performance and for investors looking to diversify their portfolios across different asset classes. Companies looking to raise capital could consider doing this through issuing Debentures.
To buy or sell Debentures, individuals will need to open a brokerage account with
a JSE Equity Market member.