- convertible bond
- A bond that includes a provision allowing the holder to exchange the bond for a quantity of the issuer's common stock at some fixed exchange ratio. An otherwise normal corporate bond that has a fixed maturity date that pays coupon interest and repays principal at maturity. It is issued with an option to exchange the bond for a fixed number of shares of common stock at the option of the bondholder, thereby allowing the convertible bond to share in the growth potential of the underlying common stock. It is senior to stock within the corporate equity structure, although probably junior to other corporate debt. Convertible bonds are often callable. American Banker Glossary————General debt obligation of a corporation that can be exchanged for a set number of common shares of the issuing ( issue) corporation at a prestated conversion price. Bloomberg Financial Dictionary————A bond that can be converted into other securities. Euroclear Clearing and Settlement glossary————A bond which confers on the holder the right to exchange the bonds for other securities of the issuing company at a predetermined price and at, or during, determinable dates. Exchange Handbook Glossary————These bonds can be converted into a specified number of shares of the issuing company at a pre-determined price. London Stock Exchange Glossary
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A bond that is convertible into a fixed number of an issuing company's stock at a pre-set conversion price. This price is usually at a premium over the current or average price, but purchasers of the convertible bond hope that the price of the underlying stock will rise. Because of the prospect of possible capital gains on the shares, the bond can carry a lower coupon, or nominal rate of interest. Convertible bonds may often be used for arbritrage by traders who can make money by spotting differences between the valuation of the bond and the underlying shares.* * *
convertible bond UK US noun [C]► FINANCE, STOCK MARKET a bond that can be exchanged for ordinary shares: »The group may have to seek additional future funding by issuing convertible bonds.
Financial and business terms. 2012.
