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.