What is convertible bonds? Why would a company issue a convertible bond ?

• The bonds which the corporation issues are mainly known as convertible bonds. As the name suggests, convertible bonds can be converted into shares of the same company's stock as per the choice of the bondholder. Thus, convertible bonds possess both equity and debt qualities, and they usually offer more revenue than common stock but not more than corporate bonds. 

• Convertible bonds do also come along with a specific maturity date. If an investor decides to convert the bonds into equity, the bond will lose its debt properties and possess only equity properties. However, if an investor is not willing to convert the bond, then, in that case, he will receive only the face value of the bonds upon its maturity.

Why do companies issue convertible bonds?

There are mainly two reasons why companies issue convertible bonds.

• Convertible bonds help to lower the coupon rate on debts.

• Convertible bonds help in delaying dilution.

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