Exchangeable Debt

Exchangeable Debt

A debt security that the holder may exchange, at a certain price, for common stock in the company other than the one that issued the debt security. The number of shares one receives for each security and the price one pays for those shares are determined when the exchangeable debt is issued. Most of the time, the common stock is in a subsidiary of the company that issued the exchangeable debt. Exchangeable debt 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. Exchangeable debt operates like a convertible bond; the main difference is the fact that in a convertible bond the common stock that one may buy is the stock of the company issuing the bond rather than that of a subsidiary.
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Gentry and Schizer examine one such innovation: publicly traded exchangeable debt issued in the United States between 1992 and 2000.
This paper analyzes the valuation effects of and the motivation for issuing exchangeable debt -- a hybrid form of convertible debt.
Although the statute grants the Treasury regulatory authority to deal with "conversion rights," preliminary reaction from government officials is that a "conventional" convertible or exchangeable debt instrument will be respected and will not be separated into a debt and option component.
3 billion of Time Warner Exchangeable debt puttable in 2013.
These public equity holdings are generally liquid despite non-binding ties to exchangeable debt, equity derivatives, and strategic plans.
The purpose of the share repurchase is to hold the shares in treasury in order to satisfy obligations from exchangeable debt instruments and/or employee share-based remuneration plans.
The company disclosed earlier this year that the IRS notified Liberty that it believes the interest expense deductions on exchangeable debt is overstated by using the comparable yield calculation (the interest that Liberty would pay had it issued straight debt) versus the low coupons used to calculate cash interest.
Maffei, Liberty President and CEO, said, "Today we have announced a change in the attribution of three issuances of our exchangeable debt as well as our existing stake in Live Nation.
In August 2006, Millicom will repay its mandatory exchangeable debt with the Tele2 shares that it holds.
The Viacom Exchangeable Debt, which has a face amount at maturity of $551 million, was formerly attributed to Liberty Entertainment.
They are also required to make additional principal repayments under the term loan facility and the restructured credit agreement in certain circumstances, including the issuance of equity or convertible or exchangeable debt securities of Crystallex and its subsidiaries other than pursuant to existing credit arrangements.