The hosts discuss their preference for regular corporate convertibles over bank convertibles, citing the embedded call options and downside potential of the bonds. They also highlight the matter of credit suites shareholders having a recovery in the additional tier one Bailin and express gratitude to the guest for their insights.
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.