Mandatory convertibles

Mandatory convertibles

A debt instrument that is exchangeable at some point for equity in the form of common stock or a new issue.

Mandatory Convertible

A bond that must be converted into common stock in the company issuing it on or before a certain date. An advantage of a mandatory convertible to the investor is the fact that it guarantees a certain return up to the conversion date, after which there is no guaranteed return but the possibility of a much higher return. A publicly-traded company issues mandatory convertibles when it needs to raise the capital provided by issuing stock, but when doing so would put a strain on the price of existing shares.
References in periodicals archive ?
6 billion of mandatory convertibles issued in 2001, adjusted leverage is estimated at 1.
Initial plans called for approximately $100 million of common equity and approximately $300 million of mandatory convertibles.
Due in part to the high level of equity credit granted to the mandatory convertibles by Fitch, the impact of these increases on TPG's pro-forma debt leverage is favorable.
Fitch has affirmed its 'AA-' rating on EDS's senior unsecured notes and mandatory convertible notes, and its 'F1+' rating on EDS's commercial paper.
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