Convertible bond

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Convertible bond

General debt obligation of a corporation that can be exchanged for a set number of common shares of the issuing corporation at a prestated conversion price.

Convertible Bond

A bond that a bondholder may exchange, at a certain price, for common stock in the company issuing the bond. The number of shares one receives for each bond and the price one pays for those shares are determined when the convertible bond is issued. A convertible bond is a low-risk investment, but it affords the investor a great amount of leeway because he/she can exchange it for another security with higher risk and a higher return. Certain convertible bonds may only be exchanged at certain points in their lives. The extent to which bondholders exchange convertible bonds is sometimes seen as an indication of whether the share price is overvalued or undervalued. See also: Busted convertible, Overhanging bond, Convertible preferred stock.

Convertible bond.

Convertible bonds are corporate bonds that give you the alternative of converting their value into common stock of that company or redeeming them for cash when they mature.

The details governing the conversion, such as the number of shares of stock you would receive, are set when the bonds are issued.

A convertible bond has a double appeal for investors. Its market value goes up if the stock price rises, but falls only to what it would be as a conventional bond if the stock price falls. In other words, the upside potential is considered greater than the downside risk.

While convertible bonds typically provide lower yields than conventional bonds from the same issuer, they may provide higher yields than the underlying stock.

You can buy convertibles through a broker or choose a mutual fund that invests in them.

References in periodicals archive ?
Digitalist said that on 4 April 2016, its largest shareholder Tremoko subscribed for the convertible bond directed to Tremoko in accordance with the decision of Digitalist's Annual General Meeting of 7 April 2016 in full, worth altogether EUR 9,200,000.
Why are convertible bonds suitable for GCC issuers?
If they want to exit or reduce it over time, convertible bonds are an appealing instrument for them to do so.
Pursuant to the agreement, the five-year convertible bonds will bear interest at the rate of five percent per annum.
The contingent convertible bonds would pay annual interest of 6.
The company is to issue the Convertible Bonds at reasonable cost with the term of five years, and the Bonds bear interest at the rate of 1.
The prospect of new convertible bonds issuance hit Tabreed shares which fell 4.
7 billion dirham convertible bond issue and a loan facility of up to 1.
14 million mandatory convertible bonds on a rights basis at an issue price of RO0.
On February 14, Immofinanz invited bondholders of the outstanding convertible bonds due 2014 and 2017 to sell their debt certificates back to the company.
Aabar has] a lot of convertible bonds issued to International Petroleum Investment Company (IPIC).
The convertible bonds have an initial conversion price of HKD12.