What is Unencumbered Property?

Unsecured securities are securities issued without any property as collateral. General public bonds, most local government bonds and financial bonds are unsecured securities. For unsecured corporate bonds, they are mainly issued by large creditworthy companies, and general SMEs must issue mortgage bonds in accordance with regulations. The risk of unsecured securities is greater than the risks of mortgaged securities. However, since the issuers of unsecured securities are mainly governments, banks and some large companies, although there is no physical mortgage, their financial resources and creditworthiness cannot be doubted, and their ability to pay debts is reliable. However, after the company goes bankrupt and is liquidated or reorganized, its order of repayment is always ranked after unsecured bonds. Therefore, investors must carefully examine the issue of long-term bonds issued by the issuing company before purchasing unsecured bonds. And all of its assets and profitability. If the company has not issued a large number of bonds before, or has not issued mortgage bonds, the position of unsecured bonds should be more secure, otherwise, the risks are greater. At the same time, whether the quality of bonds is good or not depends on the profitability of bond issuers. ^[1]

Unsecured securities

Unsecured securities are securities issued without any property as collateral. The risk of unsecured securities is greater than the risks of mortgaged securities. Usually, unsecured securities are issued by governments, banks, and some large financial and creditworthy large companies. Although there is no physical mortgage, the ability to repay debt is more reliable. Liquidation or reorganization, the order of repayment of unsecured bonds is ranked after mortgage bonds.

The characteristics of unsecured securities are:

1. Issuers have high credibility, typically governments, banks and large companies.

2. Unsecured securities issued by companies are more risky than mortgage securities, so interest rates are twisted higher.

After the company goes bankrupt and is liquidated, its repayment order is to mortgage the bond factory first and then unsecured bonds. As an investor, it is necessary to consider the issuance of the company's long-term bonds and all assets and profitability. If the company has not issued a large number of bonds before or has not issued mortgage bonds, the risk of unsecured bonds is relatively small. Investors should also pay attention to the protective clauses in the contract. Some countries have made relevant provisions: For example, when a company issues a new mortgage bond, the previously issued unsecured bonds are also guaranteed accordingly; the company's net assets are reduced below a certain standard Dividends may not be paid at the time; all bonds issued by the company, including unsecured bonds, are restricted to a certain percentage of all assets or capital stocks.