Convertible bonds

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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