Convertible debt and straight debt issued with warrants are similar securities, because both are debt securities that re

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Convertible Debt And Straight Debt Issued With Warrants Are Similar Securities Because Both Are Debt Securities That Re 1 (21.08 KiB) Viewed 53 times

Convertible debt and straight debt issued with warrants are similar securities, because both are debt securities that represent potential equity claims on the issuer's assets. In fact, convertible debt can be thought of as straight debt plus nondetachable warrants. However, several important distinctions do exist. Use the following table to indicate whether the characteristic listed refers to convertible bonds or to stock warrants: Convertible Bonds Stock with Warrants Characteristic These securities typically have a shorter maturity. These securities may contain a call provision that allows the issuer to force conversion or exercise of the securities before their maturity. These securities tend to have higher flotation costs. 0 These securities tend to be issued by larger, less risky firms. Do convertible securities aggravate or ease potential conflicts between bondholders and shareholders? Ease potential conflicts between bondholders and shareholders O Aggravate potential conflicts between bondholders and shareholders