Quick Finance Tip – Convertible Bond

​Convertible bond is a hybrid between both debt and equity. It gives the bondholder the right to exchange the bond for a specified number of common shares. Advantages include (i) gives bondholders the ability to convert into equity in case of share price appreciation, (ii) the bondholders receive downside protection by regular coupon payments and a promise of principal repayment (if share price does not appreciate).