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CS Professional · Strategic Management and Corporate Finance · Raising of Funds - Private Funding

Which feature distinguishes privately placed non-convertible debentures from a term loan taken from a bank?

Privately placed debentures are transferable securities offered to a select group of investors and may be listed, whereas a term loan is a direct bilateral loan contract with a lender. Both usually carry interest and may be secured, and debenture holders do not get shareholder voting rights.

  1. AThe debentures are securities issued to a select group of investors and can be listed or traded, while a term loan is a bilateral lending contractCorrect
  2. BDebentures never carry interest, while term loans always do
  3. CA term loan is always unsecured, while debentures are always secured
  4. DDebentures give voting rights in general meetings, while term loans do not

Explanation

Privately placed debentures are securities offered to identified investors and can be transferred or listed. A term loan is a contract between borrower and lender. Debentures normally carry interest and may be secured or unsecured, and debenture holders have no general-meeting votes.

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