Table of Contents
Type of Interest Rates
- Fixed Rate Debentures
- Floating Rate Debentures
Fixed Rate Debentures
Fixed rate debentures have fixed interest rate over the life of the debentures. A fixed charge is a charge or mortgage secured on particular property, e.g. land and buildings, a ship, piece of machinery, shares, intellectual property such as copyrights, patents, trade marks, etc.
Floating Rate Debentures
Floating Rate Debentures have floating rate of interest which is dependent on some benchmark rate say LIBOR etc. A floating charge is a particular type of security, available only to companies. It is an equitable charge on (usually) all the company’s assets both present and future, on terms that the company may deal with the assets in the ordinary course of business. Very occasionally the charge is over just a class of the company’s assets, such as its stock.
The floating charge is useful for many companies, allowing them to borrow even though they have no specific assets, such as freehold premises, which they can use as security. A floating charge allows all the company’s assets, such as stock in trade, plant and machinery, vehicles, etc., to be charged.