Investing in a Loan Note – How secure is my money?
Andrew Ritchings is a Family Office Consultant and Private Investor at Thomas Kelly Holdings
When a client invests in a UK Loan Note, security measures are put in place to protect their investment. One important aspect of security is the company debenture. A debenture is a document that outlines the terms and conditions of a loan and provides security for the lender.
In the case of a UK Loan Note, a company debenture may create a charge over the company's assets, including its property, plant, equipment, and other tangible assets. This charge acts as a security interest in favor of the client, ensuring that if the company defaults on its obligations, the client has a claim on the specified assets.
Additionally, a Security Trustee is often appointed to safeguard the interests of the investors. The Security Trustee acts as an independent entity that holds the security on behalf of the investors. Their role is to ensure that the terms of the debenture are followed and that the security provided by the company remains intact. They may have the authority to take necessary actions in the event of a default, such as enforcing the security and initiating recovery processes on behalf of the investors.
The specific details and protections offered by a company debenture and Security Trustee can vary depending on the terms of the loan note and the arrangements made between the client and the issuing company. It's essential for investors to carefully review the terms and seek professional advice to fully understand the extent of the security provided by the debenture and the role of the Security Trustee in their investment.