Collaterals are assets or financial guarantees underlying the debt obligation “above and beyond” the issuer’s promise to pay. Secured bonds are backed by assets or financial guarantees pledged to ensure debt repayments in the case of default. Unsecured bonds have no collateral. Senior debt is the debt that has a priority claim over junior debt.
Debentures are bonds that can be secured or unsecured. In many jurisdictions, debentures are unsecured bonds, with no collateral backing. If secured, debenture holders rank above unsecured holders. Types of collateral backing includes:
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