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Hi sir,
As per my knowledge I understand hybrid – convertibles are types of finance which have both elements debt and equity. And convertibles gives right to holders to convert their securities into shares at either predetermined price or ratio. Is that correct?
And can you please explain me hybrids – loan notes with warrants. Thank you in advance.
I actually do explain both in my lectures.
In order to make an issue of debt borrowing attractive to investors (and to be able to pay lower than normal interest), convertibles give the lenders the ability of changing into shares when it comes time for redemption instead of taking the cash (it will be their choice at the time). Warrants are effectively giving then lenders ‘vouchers’ that let them buy shares at a lower than normal price should they want to.
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