Convertible debentures are a type of debt instrument that can be converted into equity shares of the issuing company at a predetermined price. They are a hybrid security that combines the features of debt and equity, offering investors both fixed income and potential capital appreciation.
Convertible debentures are a type of debt instrument that can be converted into equity at the option of the holder. They are a hybrid security that combines the features of both debt and equity. Convertible debentures are issued by companies to raise capital and provide investors with the option to convert their debt into equity at a predetermined price.
Convertible debentures are attractive to investors because they offer the potential for higher returns than traditional debt instruments. They also provide investors with the flexibility to convert their debt into equity at a later date, allowing them to benefit from any potential appreciation in the company’s stock price.
Convertible debentures are typically issued with a fixed rate of interest and a maturity date. The conversion price is usually set at a premium to the current market price of the company’s stock. This premium is intended to compensate the investor for the risk associated with investing in the company’s stock.
The terms of the convertible debenture are typically negotiated between the issuer and the investor. The terms may include the conversion price, the conversion ratio, the conversion period, and the conversion rights. The conversion ratio is the number of shares of common stock that can be received for each convertible debenture. The conversion period is the length of time during which the investor can convert the debenture into equity. The conversion rights are the rights of the investor to convert the debenture into equity at any time during the conversion period.
Convertible debentures are a popular form of financing for companies that are looking to raise capital. They provide investors with the potential for higher returns than traditional debt instruments and the flexibility to convert their debt into equity at a later date. However, they also carry a higher degree of risk than traditional debt instruments and should be carefully considered before investing.