Mandatory Convertible

You bought the bond at par: $1,000. It was issued by whoever.com, whose stock was, at the time, trading for $22 a share. The company only wanted to pay 4.5% interest. Straight vanilla bond interest at the time would have been 5.5%, but they saved 100 basis points by having this convertibility feature.

The only catch: the bonds were convertable at the behest of the company, i.e., the issuer, i.e. they were mandatorialy convertible once the stock hit $40 a share into 30 shares.

So do the math. They were bought at a grand, but convert at $1,200, or 20% above the par price. Desirable? Not desirable? Depends on your perspective. For mutual funds that must own bonds and high dividend stocks, they might be forced to sell their interest in the company should the stock hit $40, and that might make them...sad. But if you're a normal vanilla investor, maybe you like this. If the stock really takes off and goes to $50 then, great...you had bond-like risk in the beginning, and then took equity risk on the upside.

Nice experience if you can get it.