Convertible bond

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Convertible bond

General debt obligation of a corporation that can be exchanged for a set number of common shares of the issuing corporation at a prestated conversion price.

Convertible Bond

A bond that a bondholder may exchange, at a certain price, for common stock in the company issuing the bond. The number of shares one receives for each bond and the price one pays for those shares are determined when the convertible bond is issued. A convertible bond 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. Certain convertible bonds may only be exchanged at certain points in their lives. The extent to which bondholders exchange convertible bonds is sometimes seen as an indication of whether the share price is overvalued or undervalued. See also: Busted convertible, Overhanging bond, Convertible preferred stock.

Convertible bond.

Convertible bonds are corporate bonds that give you the alternative of converting their value into common stock of that company or redeeming them for cash when they mature.

The details governing the conversion, such as the number of shares of stock you would receive, are set when the bonds are issued.

A convertible bond has a double appeal for investors. Its market value goes up if the stock price rises, but falls only to what it would be as a conventional bond if the stock price falls. In other words, the upside potential is considered greater than the downside risk.

While convertible bonds typically provide lower yields than conventional bonds from the same issuer, they may provide higher yields than the underlying stock.

You can buy convertibles through a broker or choose a mutual fund that invests in them.

References in periodicals archive ?
Assuming full conversion of the Convertible Bonds at the initial Conversion Price of HK$160 per Share, the Convertible Bonds will be convertible into approximately 24,228,437 Shares, representing approximately 2.
According to a mutual fund survey conducted by Value Line, convertible bond funds have averaged a 12% total return the last five years on an annualized basis, compared with 13% for growth and growth-income funds, 12% for income funds and 15% for the S&P 500.
Among those firms that issue convertible bonds, higher-quality firms set low conversion ratios (high conversion premiums), while lower-quality firms within this group set high conversion ratios (or low conversion premiums).
The investment value of a convertible bond remains stable over a wide range of stock prices and drops only as the stock price approaches zero, which means the company is nearing bankruptcy.
For example, an enterprise might issue convertible bonds with a face amount of $50,000,000 and a coupon rate, payable semi-annually, of 7.
Our convertible bond trading platform has continued to gain market share, create innovative structures and profitably weather the most challenging of times for the asset class," said Weinstein.
ii) a mixed cash and exchange offer for all Convertible Bonds issued prior to February 6, 2006.
Convertible bonds are hybrid instruments with characteristics of both traditional bonds and equities.
In connection with this arrangement, the seller of the derivative has informed Navistar that it intends to purchase Navistar common shares in open-market transactions upon completion of the distribution of the convertible bonds.
MTR Securities is a globally focused fixed income firm recognized for providing institutional clients worldwide with independent research and trading expertise in corporate high-yield and convertible bonds, distressed bank loans and emerging market debt.
Among those who suggest that they really like convertible bonds, there's no one who says, convincingly, that he's getting a bargain when he buys them," he noted.
The company will apply for the admission to listing on Nasdaq Europe of all new shares and the new shares that can be issued upon conversion of the convertible bonds.