Mickeyg,
Complex area this - and I'm definately not the expert (I'd suspect many with a legal background will give a better answer than I) - not quite as clearcut as Dewdrop might suggest - firstly there are both fixed and floating debentures. Fixed being in effect like a first legal charge over an asset like property - but could be machinery (but usually only where the machine is very specialised, large (valueable) and not something that the business would be changing frequently, for example a car or van).
A Floating debenture is again like a charge over the current assets (debtors/stock and indeed unspecified machinery, which would be classified as fixed assets in the Balance Sheet) - however a floating charge (as far as I'm aware), ranks after...
a) employees (for example unpaid wages - redunadancy payments etc)
b) preferential creditors - tax, vat etc
c) those with a first legal charge on the particular assets - for example if the machinery was leased, then the leasing co would have to be paid first, if the debtors were factored, then the factoring co would have to be paid first and if the stock has reservation of title clauses then the original unpaid seller would have to be compensated first - so the floating debenture would have questionable value as security for a bank - the one thing it does allow a bank do is appoint a receiver, and that at least does give some element of control, when things have gone badly wrong.
Hope that helps, and I'd suspect there may be elements of this that may be interprested differently or explained better than I have done.
Regards,
BM