Exchangeable bond: Difference between revisions
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imported>Doug Williamson (Mend link.) |
imported>Doug Williamson (Expand definition.) |
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A straight bond with an embedded option to exchange the bond for the stock of a company other than the issuer (usually a subsidiary or company in which the issuer owns a stake) at some future date and under prescribed conditions. | A straight bond with an embedded option to exchange the bond for the stock of a company other than the issuer (usually a subsidiary or company in which the issuer owns a stake) at some future date and under prescribed 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. | |||
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* [[Convertible bonds]] | * [[Convertible bonds]] | ||
* [[Embedded option]] | * [[Embedded option]] | ||
* [[Issuer]] | |||
* [[Option]] | * [[Option]] | ||
* [[Straight bond]] | * [[Straight bond]] | ||
Revision as of 15:32, 16 November 2022
(XB).
A straight bond with an embedded option to exchange the bond for the stock of a company other than the issuer (usually a subsidiary or company in which the issuer owns a stake) at some future date and under prescribed 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.
