A debenture is an unsecured debt issued by a company or government to raise capital. Because there is no collateral backing the debt, the debentures can be riskier than secured debt. Debentures are valued based on the creditworthiness of the issuer. Debentures, just like bonds, pay interest at set intervals and have a maturity date. The maturity date is often more than 10 years. Some debentures, called convertible debentures, can be converted into equity after a certain period of time. For the flexibility of converting debt to equity, convertible debentures pay a lower interest rate than non-convertible debentures.
