Forced Conversion

The issuer of this particular bond has the right as described in the indenture, to convert the bond either into, say, 25 shares of common stock (which sorta implies a stock price of 40 bucks or thereabouts)...or the issuer or company who sold the bond in the first place can simply call the bond and force-convert it into cash for the small conversion premium of 2.5 percent...or 25 bucks in this thousand dollar par value bond. That is, the issuer can force the conversion of their bonds into shares at a given price.

Forced conversion, in a bond sense, is usually something companies do when they can either refinance the bond at cheaper interest rates or are doing so well operationally that they have enough cash to just retire their debt. Either way, it’s usually way less painful than the other flavor of forced conversion, pioneered in Spain in the 17th century.