This section of the book is from the "Canadian Banking Practice" book, by John T. P. Knight.
Question 230.— A trading company makes an issue of debentures, secured by mortgage, over all its property, to which debentures no coupons are attached. Apart from the question of the value of. the property of the company would such issue be looked upon as a desirable security for advances by a bank. If not, why not ?
Answer.—It is not made quite clear whether the question has relation to the fact that the debentures are those of a trading company, or to the fact that no coupons are attached.
As to the former we do not think that the debentures of a trading company are good security for the bank, for the reason that they are usually extremely difficult to sell.
As to the point of their not having coupons for the interest, that might or might not be a serious objection. It would no doubt in any case impair their selling value, for people would in such case have to send the debentures every time they wished to collect the interest, and if they were payable at a distance from the place where the holder resided, this might be quite a serious item. We do not, however, see any other objection from this point of view.