UK Accounting Glossary
Loan finance traded on a stock exchange. Loan stock is shares in a business that have been pledged as collateral for a loan. This type of collateral is most valuable for a lender when the shares are publicly traded on a stock exchange and are unrestricted so that the shares can be easily sold for cash.
Loan stock is stock issued by a company in exchange for a loan, but carries no security or guarantee. Two types of loan stock exist: unsecured loan stock and convertible loan stock. The holder of loan stock becomes a creditor of the company, has no influence over the company’s business, and is not entitled to any assets of the company in the event of failure to perform on the loan. Unsecured loan stock is similar to unsecured loans for individuals. The creditor receives no collateral to guarantee repayment of the loan. Additionally, in the event of default on the loan, the loan stock provides no rights to any of the company’s property as repayment. Convertible loan stock benefits the creditor through the conversion feature, as the stock is convertible into shares of the company. An accompanying loan stock contract specifies the number of shares that the loan stock converts into, and the timing. With convertible loan stock, the company benefits from a low, fixed rate of interest. In the UK, loan stock denotes a debt security with a fixed rate of interest, may be unsecured and is repaid after a specific period of time.
Bank, mortgage and loan stocks extended yesterday’s losses.
He toured the country fundraising and selling loan stock in order to fund the projects.
The number of the foreign currency loans amounted to only 23% of the entire loan stock.
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This glossary post was last updated: 23rd December 2018.