What Are Secured Debentures?

A covered bond is a bond that guarantees debt obligations by another entity. The security of a covered bond depends on the financial ability of the guarantor to fulfill the terms of the guarantee and the financial ability of the issuer. The guarantee clause may require the guarantor to guarantee payment of interest or principal. In the event that the issuer does not have sufficient cash flow to pay its debts, even priority legal status cannot guarantee that bondholders will avoid financial losses. ^[1]

Secured bond

The guarantor shall be an enterprise legal person complying with the "Guarantee Law" and shall also meet the following requirements:

The net assets cannot be offset by the principal and interest of the bond that the assured intends to issue;

Consecutive profits in the past three years, and have good performance prospects;

Does not involve matters such as reorganization, dissolution, or major lawsuits;

Other conditions stipulated by the People's Bank of China.

Guaranteed bonds can be divided into collateral: mortgage bonds, pledged bonds, guaranteed claims