Convertible Debenture Agreement

After three years, the international expansion is a hit and the company`s share price rises from 20 to 100 $US per share. Convertible bondholders can convert their debt into shares in a 20:1 conversion ratio. Investors with a bond can convert their debt into shares worth US$2,000 (20 x $100 per share). These long-term bonds, like any other loan, pay interest rates to the bondholder. The peculiarity of convertible bonds is that they can be exchanged for shares at certain times. This function gives the bondholder a certain guarantee that can offset certain risks associated with investing in unsecured debts. Convertible bonds are a kind of hybrid security with characteristics of both debt and equity instruments. Companies issue convertible bonds in the form of fixed-rate loans and regularly pay fixed interest to the bondholder. Bondholders have the option to hold the debt to maturity – at which point they receive the return on their capital – but holders can also convert the bonds into shares. As a general rule, the bond can only be converted into shares after a specified period of time, as indicated in the offer of the loan. The risk for investors is that in the event of default, there is little insurance if they hold common shares. However, where an investor holds a convertible bond during the liquidation of the bankruptcy, the bondholder is paid before the ordinary shareholders.

The company issues convertible bonds to attract enough investors to finance its international expansion. The changeover to the euro comes after three years in a ratio of 20 to 1. Partially convertible bonds are also a version of this type of debt. These loans have a predefined share that can be converted into shares. The conversion ratio shall be fixed at the beginning of the issue of the bond. Together, the documents offer a starting point for you to save time and money and help negotiate terms with investors. Remember to always get good legal advice when intermediating financing. Convertible bonds are a kind of long-term bonds issued by a company that can be converted into shares after a given period of time. Convertible bonds are typically unsecured bonds or loans, often without underlying collateral that support the debt. .

. .