convertible security


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Related to convertible security: Mandatory Convertible

Convertible security

A security that can be converted into common stock at the option of the securityholder; includes convertible bonds and convertible preferred stock.

Convertible Security

A bond or preferred stock that may be exchanged for common stock in the company issuing the exchangeable security at a certain ratio and/or a certain price. A convertible security gives the holder a great deal of flexibility. It reduces risk by guaranteeing a coupon payment or dividend while also allowing the holder to take advantage of a potentially larger return through the ability to convert the security to common stock. It is less commonly called an exchangeable security. See also: Convertible Option.

convertible security

A security that, at the option of the holder, may be exchanged for another asset, generally a fixed number of shares of common stock. Convertible issues frequently are fixed-income securities such as debentures and preferred stock. Their prices are influenced by changes in interest rates and the values of the assets into which they may be exchanged. Convertible securities vary in price to a greater degree than straight debt but to a lesser degree than the underlying asset. Also called convertible. See also bond conversion, busted convertible, conversion premium, conversion price, conversion ratio, conversion value, mandatory convertible security.
Case Study Convertible securities sometimes sport unusual features that can make these investments difficult to evaluate. In July 2001 Norvellus Systems, a manufacturer of semiconductor production equipment, issued unrated zero-coupon bonds convertible into shares of the firm's common stock at a price of $76.36 per share, a 50%premium to the market price. Zero-coupon debt securities are popular with many borrowers and investors, so the lack of a coupon on the issue was not especially unusual. The unique feature was the issue price of the bonds, which were sold at face value rather than a discount to face value. Virtually all zero-coupon bonds are issued at a discount to par value, thus attracting buyers who are assured of earning a positive return in the event the securities are held to maturity. To attract investors to this unique bond Norvellus agreed to allow bondholders to redeem their securities at par value at the end of one year. In other words, buyers of the securities were guaranteed they would be able to recoup their original investment at the end of a year if they were unhappy with the firm's stock price performance. During the first year Norvellus invested proceeds of the bond issue in U.S. government securities. The government securities collateralized its bonds and allowed the firm to earn interest income at the same time it was not paying interest to bondholders who had purchased the firm's debt. Holders of the convertibles who decided not to redeem the bonds at the end of the first year held a debt security that could be converted into common stock but paid no interest.
References in periodicals archive ?
the third secured Convertible Security with a face value equal to 122.
the fourth secured Convertible Security with a face value equal to 122.
Bergen will not convert an amount that is less than $300,000 at any time (except where the balance of a Convertible Security outstanding is less than $300,000).
The conversion price will be determined by dividing the relevant amount to be converted by 90% of the average of three daily volume weighted average prices ("VWAPs") during a specified period prior to the conversion notice date of the Convertible Security.
The Company has retained the right to redeem for cash up to 100% of a Convertible Security that is outstanding and has not been converted, at any time prior to the date 120 days after the date of execution of the Agreement, at its face value (subject to Bergen's right to exclude up to 30% of the Convertible Security's amount from the redemption).
Options:- At the time of issuance of each Convertible Security the Company will grant Bergen 13,000,000 three-year options exercisable at a price equal to 120% of the average of the VWAPs per Company's share for the 20 trading days prior to the date of the issuance of the Convertible Security.
A decrease in the loss per share or increase in earnings per share caused by inclusion of a contingent security, convertible security, option or warrant in diluted EPS.
At $1 billion, it was the largest registered convertible security ever issued by a Latin American company.
The transaction is the first convertible security by a Latin American company since December, 1996 and the first equity or convertible issuance out of Latin America since July of 1998.
The convertible security is for a three-year period, with conversion to CSCC's common stock at any time during the term of the convertible security.
In addition CSCC is pleased to have Everbright nominate one member to CSCC's board of directors after the closing of the convertible security transaction.
These transactions are subject to execution by both companies of definitive convertible security and stock purchase agreements, approval by regulatory agencies as well as the board of directors of both companies and also shareholder approval where required.