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 ?
Although Fitch does not expect the revised approach to result in any rating impact, equity credit (EC) on the cumulative hybrid debt of REITs and certain mandatory convertibles rated by the agency may be affected.
Mandatory convertibles, which offer regular interest or dividend payments to investors before turning into stock, could attract dividend and growth fund investors.
GM is not expected to issue new common stock in the IPO but plans to sell about $3 bln in mandatory convertible securities that convert into shares in the future, a person familiar with the plan previously told Reuters.
"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).
An issue of mandatory convertible bonds is among options being considered and DSI has made a strategic decision to withdraw gradually from its civil engineering business in Saudi Arabia, Sadangi added.

Full browser ?