Indenture Convert For Free

Some convertible bonds are subject to forced conversion, meaning the issuing company can convert the bonds into shares and cease interest payments at its discretion. Forced conversion typically occurs when the share price of the underlying company is approaching the bond's conversion price.

Example of a Convertible Security Based on the company's credit rating, the interest rate is set at 8%. The company determines that the interest rate can be reduced to 6% by adding a conversion option at $10 per share. On a $1 million convertible bond offering, the company saves $20,000 per year in interest.

Conversion Discount: When the convertible notes convert to equity in the event of a qualified financing, not only do the note holders get credit for both their original principal plus accrued interest to determine how many shares they receive, they also generally get a discount to the price per share of the new equity.

What Is the If-Converted Method? Investors use the if-converted method to calculate the value of convertible securities if they were converted into new shares. This is done by looking at the conversion ratio of the convertible security and then comparing the conversion price to the current market price of the stock.

A mandatory convertible is a bond issued by a company which must be converted into shares to common stock on or before a specific date. Traditional convertible bonds allow bondholders the option of converting, while in a mandatory convertible this is required.

Typically, the result is that the amount will convert to shares. If the convertible notes convert into shares, the company will need to determine how many shares to issue to the noteholder. To do so, the company will usually divide the loan amount, plus any accrued interest, by a certain share price.

Forced conversion occurs when the issuer of a convertible security exercises their right to call the issue. In doing so, the issuer forces the holders of the convertible security to convert their securities into a predetermined number of shares.

A mandatory convertible is a bond issued by a company which must be converted into shares to common stock on or before a specific date. Traditional convertible bonds allow bondholders the option of converting, while in a mandatory convertible this is required.

A conversion is the exchange of a convertible type of asset into another type of assetusually at a predetermined priceon or before a predetermined date. The conversion feature is a financial derivative instrument that is valued separately from the underlying security.

So, to determine the Discount Price, we take the price per share of the Series Seed shares (the Series Seed Price) and multiply it by (1- discount) or 80%.