Warrant that allows the user to purchase a bond only by surrendering another bond with similar terms.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
A provision in some bonds requiring a bondholder to surrender a bond if he/she buys another bond from the same company. Harmless warrants allow issuers to protect themselves from suddenly finding themselves with too much debt. Hypothetically, all bondholders could decide to buy more debt from an issuer, resulting in an excessive amount of debt. Requiring a bondholder to exchange one bond to buy another prevents this. Harmless warrants only apply if the bonds are similar in every way except maturity.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved