Syndicate
What are Indexed Debentures
Are those which coupons vary taking as reference an index or parameter: the cost of life, that of the stock market, etc.
They are taken as reference to calculate the interests of those assets. However, the variations doesn’t have to be total, it can be partial and may correct certain type of risks such as is the inflation or the rise of the quotations.
Definitely, the indexed debentures are assets whose payments of interests or value of amortization are tied with the evolution of a determined index and whose objective is to protect its buyers and issuers from the risk that supposes the variations of the index taken as reference. The variations of this index only affects the interests perceived. The nominal of the principal is maintained unalterable.
Among the advantages for the issuer, we must emphasize that it permits them a better collocation of their debentures between the public.
And as inconvenient:
- It supposes to them an increase of the cost of emission, when assuming risks that usually are the investors who suffer it.
- It creates an uncertainty in the financial planning of the Company.
Basically we can distinguish two great types of indexed debentures:
- Indexed debentures due to an indexed quotation in the market, that is, emissions that are referenced to indexed quotations in the market, that have a guaranteed capital and the yield tied to the evolution of the indexed quotations of the market at the dates of emission and of amortizations.
Debentures with clause of Participation on the Profits
This type of debentures are considered as mixed assets between the shares and debentures due that they have similar characteristics to both:
They are debentures that, apart of fixing a coupon or fixed retribution, it permits the debenture holders (under certain specifications market on the contract) to participate on the results of the issuing companies of these assets. This last characteristic is similar to that of the shares.