Explanation:
The statement that debenture bondholders have no right over the assets of the issuer is incorrect. Despite being unsecured, debenture bondholders do have rights to the issuer's assets, albeit in a subordinate position.
Q.909 Debentures are unsecured bonds issued by companies that do not have any pledge security or asset as collateral. While investors prefer secured bonds, the larger portion of bonds is dominated by debentures. Analyze and determine which of the following points regarding the rights of debenture holders is incorrect.
A
Debenture bondholders have a general claim on assets that are not pledged against secured debt.
B
Debentures are unsecured bonds; therefore, the debenture bondholders have no right over the assets of the issuer.
C
Debenture bondholders have a right to the pledged assets if the value of the pledge assets exceeds the claims of secured bondholders.
D
In absences of pledged assets or secured creditors, the claim of debenture bondholders is equal to the claims of other creditors.
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