Exchangeable Debt

Exchangeable Debt

A debt security that the holder may exchange, at a certain price, for common stock in the company other than the one that issued the debt security. The number of shares one receives for each security and the price one pays for those shares are determined when the exchangeable debt is issued. Most of the time, the common stock is in a subsidiary of the company that issued the exchangeable debt. Exchangeable debt 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. Exchangeable debt operates like a convertible bond; the main difference is the fact that in a convertible bond the common stock that one may buy is the stock of the company issuing the bond rather than that of a subsidiary.
Mentioned in ?
References in periodicals archive ?
1bn in cash, 138m newly issued shares of LMCK and a USD 351m exchangeable debt instrument to be issued by Formula One and exchangeable into shares of LMCK.
Many researchers put forward an argument that the exchangeable debt issue may be a method of defending against a hostile takeover.
Abstract We study mandatory exchangeable debt offerings.
Exchangeable debt is bonds issued by one company that are convertible into common shares of a second company (hereafter the underlying firm) in which the issuing firm has a stake.
For investors, exchangeable debt serves essentially the same function as regular convertible bonds--reasonable and predictable cash flow and upside appreciation potential with downside loss protection.
Gentry and Schizer examine one such innovation: publicly traded exchangeable debt issued in the United States between 1992 and 2000.
This paper analyzes the valuation effects of and the motivation for issuing exchangeable debt -- a hybrid form of convertible debt.
Although the statute grants the Treasury regulatory authority to deal with "conversion rights," preliminary reaction from government officials is that a "conventional" convertible or exchangeable debt instrument will be respected and will not be separated into a debt and option component.
3 billion of Time Warner Exchangeable debt puttable in 2013.
These public equity holdings are generally liquid despite non-binding ties to exchangeable debt, equity derivatives, and strategic plans.
The company disclosed earlier this year that the IRS notified Liberty that it believes the interest expense deductions on exchangeable debt is overstated by using the comparable yield calculation (the interest that Liberty would pay had it issued straight debt) versus the low coupons used to calculate cash interest.
1bn cash, 138m newly issued shares of LMCK and a USD351m exchangeable debt instrument to be issued by Formula One and exchangeable into shares of LMCK.