Convertible bonds, a hybrid debt-equity investment, are making a comeback. They offer attractive financing for tech companies. Rising interest rates impact the growth stock market. Convertible debt affects credit profiles and some companies buy back discounted securities. Regular corporate convertibles are preferred over bank convertibles for their features. The hosts express gratitude to the guest for their insights.
Read more
AI Summary
AI Chapters
Episode notes
auto_awesome
Podcast summary created with Snipd AI
Quick takeaways
Convertible bonds can be a hybrid form of debt and equity, offering the option to convert into shares.
Convertible bond issuance is on the rise, with companies taking advantage of favorable market conditions and strengthening their financial position.
Deep dives
What is a convertible bond?
A convertible bond is a fixed income instrument that pays a coupon and has a maturity, but can also be converted into a fixed number of shares. The investor can choose to be repaid at par or receive the value of the conversion value, which may be higher than par.
The attractiveness of convertible bonds for companies
During favorable market conditions, many companies issued convertibles with low or even zero coupons. This opportunistic financing allowed them to raise funds at a time when their businesses experienced significant growth or needed money due to COVID shutdowns.
Current trends in the convertible bond market
Currently, many companies are buying back their discounted convertible bonds in the open market, strengthening their financial position. Some companies are also issuing new convertibles with higher coupons, lower conversion premiums, and longer periods of core protection. Sectors such as electrification of vehicles, alternative energy, healthcare, and travel post-pandemic offer attractive opportunities in the convertible bond space.
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.
Get the Snipd podcast app
Unlock the knowledge in podcasts with the podcast player of the future.
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode
Save any moment
Hear something you like? Tap your headphones to save it with AI-generated key takeaways
Share & Export
Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode