A type of convertible debt in which the right to receive principal and/or interest is convertible at the discretion of the holder into capital stock of the issuing company at an agreed-upon rate of conversion. Such a debenture doesn’t entitle the holder to any rights to vote on matters that shareholders usually decide on. However, it has preference over common stock and preferred stock in the event of company liquidation. Sometimes, subordinated convertible debentures are used in lieu of convertible preferred stock to fund a company’s needs. As opposed to non-subordinated convertible securities, these debentures make it easier for companies to secure financing other sources.