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.

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Finance a la shmoop..what is a busted convertible?

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well techno growth forever biotechs swore to its customers that upon death they [Mans head enters into a glass jar]

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could sever their heads freeze them and in 40 years they would have technology

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to have them reborn into a really cool robot body and yeah kim kardashian model

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was a huge huge hit we cannot lie.... The company stocks zoomed to a hundred

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dollars a share and management needed cash to open offices in China Latin [Cash travels around the world]

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equity or part ownership in themselves to the street at least not at the

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hundred dollar share price they really just wanted to borrow money [Cash and an IOU note appears on a table]

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to fund these new offices because well they thought their stock would easily

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get to $250 a share in the next few years

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tons of people out there who wanted to you know live forever

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you know like fame.....nevermind their bankers were nervous about how

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investors would react to just a straight bond which carried 8% interest so

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instead they kind of compromised by doing a convertible preferred stock [Men give handshake]

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offering they sold preferred stock to the street that carried just 3% interest

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but those preferred shares were convertible into common stock at a

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hundred seventy five bucks a share so the owners of the preferred would keep [Stock value of biotech company rises]

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clipping their three percent coupons until one day the stock hit a hundred

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seventy five bucks or better well and then they could participate in the

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video....Test came back from the early decapitating trials and well they were

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oh so not good legions of zombies began to roam the streets and while consumers [Zombies walking along the streets]

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