Mandatory convertibles

Mandatory convertibles

A debt instrument that is exchangeable at some point for equity in the form of common stock or a new issue.

Mandatory Convertible

A bond that must be converted into common stock in the company issuing it on or before a certain date. An advantage of a mandatory convertible to the investor is the fact that it guarantees a certain return up to the conversion date, after which there is no guaranteed return but the possibility of a much higher return. A publicly-traded company issues mandatory convertibles when it needs to raise the capital provided by issuing stock, but when doing so would put a strain on the price of existing shares.
References in periodicals archive ?
Mandatory convertibles must be changed into underlying shares by a specific date.
The company denies the appointment of any legal adviser in connection with bringing in a strategic investor or issuance of mandatory convertible bonds," the company told the Dubai Financial Market (DFM).

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