Convertible bonds

Bonds which have the right but not the obligation to convert into a specified number of ordinary shares (or other securities) under specified terms and conditions.

This right is an option in favour of the holder / investor.

In return for this additional valuable right, the investor is generally willing to accept a lower rate of interest on the debt.

This saves interest for the issuer / borrower, at the cost of writing the option.

Convertible bonds are also known as Convertibles.

See also

• An introduction to equity capital
• Bond
• CEPS
• Convertible debt
• Conversion premium
• Conversion price
• Conversion ratio
• Conversion value
• Exchangeable bond
• Option
• Ordinary shares
• Security
• Share
• Straight bond
• Yield to conversion