Contingent conversion trigger

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Contingent conversion trigger

Used in the context of convertible instruments. The price of the stock must exceed the trigger price before the bond holder can convert to common stock at a pre-established conversion price. The trigger price exceeds the conversion price. In addition, after a certain number of years, the convertible instrument usually specifies that both the conversion price and the contingent conversion trigger will increase every year by, for example, a rate equal to LIBOR.

Contingent Conversion Trigger

In contingent convertible bonds, the price that the underlying stock must reach before conversion is allowed. All convertible bonds have a conversion price, which is the price one pays in order to exchange the bonds for stocks. Contingent convertible bonds, however, have a second, higher price that the underlying stock must meet before a bondholder is allowed to convert. This is called the contingent conversion trigger. For example, the conversion price for a contingent convertible bond may be $10 per share, but if the stock price is above $20 per share, the investor may not convert the bond. In this case, the contingent conversion trigger is $20. See also: Provisional Call Trigger Price, Trigger Price.