convertible

Convertibles are bonds issued by companies which can be converted into ordinary shares or preference shares at a given price at a future date. For example a convertible might pay 6% in income, and give the holder the right to 5 ordinary shares for every £20 of bond value.

They are a popular means of raising capital when interest rates are high, because the interest which the company has to pay on them is lower than on an unconvertible bond (the option to convert is deemed to be worth something to the holder).

From an investor's point of view, convertible bonds can be attractive if the company's stock is volatile because they provide some of the security of a bond whilst at the same time allowing the investor to convert to shares if the company's stock rises.