What are instalment debentures used for?

Instalment debentures are a specific type of debt security where the issuer is required to make periodic payments both of interest and principal over the life of the bond. This structure allows investors to receive regular fixed payments, which can provide a reliable income stream.

The primary purpose of instalment debentures is to ensure that bondholders receive consistent cash flow throughout the term of the debenture, rather than waiting until maturity to receive repayment of the entire principal amount. This feature can make them attractive to investors looking for predictable income, similar to amortizing loans in other contexts.

While instalment debentures can be linked to various financing needs, their defining characteristic is the provision of regular payments to investors, thereby distinguishing them from other forms of securities that might focus solely on capital raising or financing specific projects.