Bonds
Loan Stocks
A loan stock is a security issued by a company in respect of a loan made by investors. Loan stocks may be secured, unsecured, convertible or non-convertible, but are often unsecured, unlike debentures.
Types of Loan Stocks
- Unsecured loan stocks carry higher risk than debentures, and in the event of a winding-up, unsecured loan stock holders rank alongside all other unsecured creditors
- Convertible loan stocks carry the right to be converted into ordinary shares of the company on pre-arranged terms and within a limited period. The objective of issuing a convertible loan stock is to obtain fixed interest finance at a relatively low rate of interest and at the same time make it attractive to potential holders by the offer of equity participation at a later date.
- Notes
There also fixed income securities with a maturity date, and may or may not be redeemable.