Convertible Debt and Its Impact on Credit Profile

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This chapter discusses the use of convertible debt by corporations and its impact on their credit profile. It explores the trend of companies buying back their discounted securities in the open market to strengthen their financial position. The conversation also covers the different types of investors in the convertible bond market and the flexibility of convertibles as an investment instrument.

It’s kind of debt, and kind of equity. It’s been around for decades, but has recently come back into fashion.

What is it? It’s convertible debt.

Convertible bonds are a clubby and often overlooked corner of the corporate finance world. Last year, plunging equity valuations made for some notable horror stories — like Peloton, Ocado and Affirm — but in recent months the market has become popular once again.

For this week’s episode of Cloud 9fin, our US managing editor Will Caiger-Smith sat down with David Hulme of Advent Capital Management (whose president, Tracy Maitland, wrote a book on converts) to get the lowdown on the asset class’s resurgence.