A
floating rate bond that changes into a
fixed rate bond if the
interest rate on which the floating rate is based falls below a certain level. If this conversion occurs, the bond remains at the fixed rate until
maturity. This is designed to protect the
bondholder by providing a guaranteed minimum
coupon, but it also protects the
issuer because it locks in a fixed rate under certain circumstances, no matter how high interest rates go after those circumstances. See also:
Floor,
Convertible bond.