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Mandatory Convertible

What is a 'Mandatory Convertible'

A mandatory convertible is a type of convertible bond that has a required conversion or redemption feature. Either on or before a contractual conversion date, the holder must convert the mandatory convertible into the underlying common stock.

These securities provide investors with higher yields to compensate holders for the mandatory conversion structure.

Explaining 'Mandatory Convertible'

These are often used when a traditional equity issuance would otherwise place severe market pressure on the underlying stock.


Further Reading


Pricing and hedging mandatory convertible bonds
jod.pm-research.com [PDF]
… MANUEL AMMANN is Professor of Finance at the Swiss Institute of Banking and Finance, University of St … In this study, however, the counterparties of all mandatory convertibles analyzed are corporate debtors. Our sample covers 46 mandatory convertible bonds …

Mandatory Convertible Notes as a Sustainable Corporate Finance InstrumentMandatory Convertible Notes as a Sustainable Corporate Finance Instrument
www.mdpi.com [PDF]
… MANUEL AMMANN is Professor of Finance at the Swiss Institute of Banking and Finance, University of St … In this study, however, the counterparties of all mandatory convertibles analyzed are corporate debtors. Our sample covers 46 mandatory convertible bonds …

Back-Door Equity Financing: Citigroup's $7.5 Billion Mandatory Convertible IssueBack-Door Equity Financing: Citigroup's $7.5 Billion Mandatory Convertible Issue
papers.ssrn.com [PDF]
… MANUEL AMMANN is Professor of Finance at the Swiss Institute of Banking and Finance, University of St … In this study, however, the counterparties of all mandatory convertibles analyzed are corporate debtors. Our sample covers 46 mandatory convertible bonds …

Adverse selection and convertible bondsAdverse selection and convertible bonds
academic.oup.com [PDF]
… MANUEL AMMANN is Professor of Finance at the Swiss Institute of Banking and Finance, University of St … In this study, however, the counterparties of all mandatory convertibles analyzed are corporate debtors. Our sample covers 46 mandatory convertible bonds …

Stabilizing large financial institutions with contingent capital certificatesStabilizing large financial institutions with contingent capital certificates
www.elgaronline.com [PDF]
… MANUEL AMMANN is Professor of Finance at the Swiss Institute of Banking and Finance, University of St … In this study, however, the counterparties of all mandatory convertibles analyzed are corporate debtors. Our sample covers 46 mandatory convertible bonds …

A theory of mandatory convertibles: distinct features for large repeated financingA theory of mandatory convertibles: distinct features for large repeated financing
www.tandfonline.com [PDF]
… MANUEL AMMANN is Professor of Finance at the Swiss Institute of Banking and Finance, University of St … In this study, however, the counterparties of all mandatory convertibles analyzed are corporate debtors. Our sample covers 46 mandatory convertible bonds …

Economic consequences of financial reporting changes: diluted EPS and contingent convertible securitiesEconomic consequences of financial reporting changes: diluted EPS and contingent convertible securities
link.springer.com [PDF]
… MANUEL AMMANN is Professor of Finance at the Swiss Institute of Banking and Finance, University of St … In this study, however, the counterparties of all mandatory convertibles analyzed are corporate debtors. Our sample covers 46 mandatory convertible bonds …

PERCS, DECS, and other mandatory convertiblesPERCS, DECS, and other mandatory convertibles
onlinelibrary.wiley.com [PDF]
… MANUEL AMMANN is Professor of Finance at the Swiss Institute of Banking and Finance, University of St … In this study, however, the counterparties of all mandatory convertibles analyzed are corporate debtors. Our sample covers 46 mandatory convertible bonds …



Q&A About Mandatory Convertible


How does this security provide investors with higher yields than others?

This security provides investors with higher yields because it has an expiration date in which they must exchange their securities for another asset.

What is preferred stock?

Preferred stock is a special class of shares which may have any combination of features not possessed by common stock. The following features are...

How does preferred stock differ from common stock?

Common stocks are entitled to share in the profits and assets of the issuing company, but they do not have preference over other creditors in terms of payment. On the other hand, preferred stocks are entitled to receive dividends before common stocks and upon liquidation or bankruptcy, they rank above all debt obligations.

What is meant by "preferred" in preferred stocks?

Preferred means that these shares have priority over ordinary shares (common) with respect to dividend payments and on liquidation.

When does the holder have to convert the mandatory convertible into the underlying common stock?

Either on or before a contractual conversion date, the holder must convert the mandatory convertible into the underlying common stock.

Why do holders need to convert their securities?

Holders need to convert their securities because they are not able to hold onto them for too long.

What are some other types of bonds that can be converted into stocks?

Some other types of bonds that can be converted into stocks include traditional equity offerings and warrants.

What is a mandatory convertible?

A mandatory convertible is a type of convertible bond that has a required conversion or redemption feature.

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