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What is premium on conversion?
Is it the amount that bondholders will have to pay to the company to get their bonds converted into shares at the time of redemption ?
There is this sentence in BPP text “A company will aim to issue loan notes with the greatest possible conversion premium, as this will mean that for the amount of capital raised it will, on conversion, have to issue lowest no. Of new ordinary shares” …can you explain what this means ?
Thanks.No – it is not anything paid by the bondholders!!!
If they can convert into shares and if the shares they can convert into are worth more than the amount they originally paid for the bonds, then that is the premium they are receiving.
It seems that you are not watching my free lectures, because I explain what convertible debt is in the lectures. You cannot expect me to type out all my lectures here 🙂
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