The ins and outs of issuing convertible debt
Posted on Monday, October 26th, 2009 at 4:07 am
In order to raise capital, companies often issue debt instruments known as convertible bonds. These types of bonds are different from typical bonds because the bondholder can convert the bonds into stocks according to the bond terms.
The terms are set when the bonds are issued. They will usually detail when and at what price the bond can be converted. Because these bonds include a beneficial provision to bondholders, they are often sold at a premium.
Bondholders will typically not convert the bonds unless the market price for the stock rises above the conversion price. When this occurs, the bondholders can trade in the bonds for stocks and potentially sell the stocks for a profit.
If you or anyone you know has questions about the legal aspects of issuing debt, contact the Des Moines business lawyers of LaMarca Law Group, P.C., at (877) 327-2600.