What is a debentured loan primarily backed by?

A debentured loan is primarily backed by the issuer's creditworthiness rather than physical collateral or specific assets. This means that the loan is not secured by tangible assets, like property or equipment, but rather relies on the financial strength and reliability of the issuer as a borrower. When investors consider purchasing debentures, they assess the issuer's ability to meet its financial obligations, which is often reflected in credit ratings and the issuer's financial history. This characteristic distinguishes debentured loans from secured loans, which are directly backed by physical assets. Understanding this aspect is crucial, as it highlights the inherent risks and potential returns associated with debenture investments.