A stock that represents a loan certificate issued by an entity reflecting an underlying obligation to pay back borrowed funds along with interest to the lenders (holders of the debenture stocks), secured by all or part of the entity’s assets. The certificate sets out the issuance value of the stock, with coupons for interest attached. However, by nature, debenture stocks are not loans, but a form of equity as it gives their holders specific rights at the time of liquidation (as opposed to debentures).

This type of stock makes fixed payments at specified intervals of time, according to a schedule. The holders of the debenture stock exercise no control over the issuer or its assets, except in a predetermined event which give them legal protection against any downside effects on their holdings.

A debenture stock usually has no fixed maturity date for principal redemption/ repayment. However, holders have a fixed claim to interest payments which takes precedence over other forms of equity, such as preferred and common stocks.