A bond that an issuer contractually repays with shares (bonds that have to be converted into shares of the issuing company). In this case, only the interest payable on an ongoing basis is paid in cash. – The losers of such a bond are in any case the existing shareholders of a company. This is because repayment with the company’s own shares has the same effect as a capital increase and causes a dilution of the capital. – Another term for a mandatory convertible bond as the bond issued by an institution that is then forcibly converted into shares if the institution’s core capital ratio falls below a threshold contractually specified in the bond terms. – See GSifi, Minimum Requirements for the Design of Recovery Plans, death spiral, exchange bond, asset levy, convertible bond, convertible premium, forced expropriation. – Cf. Financial Stability Report 2012, pp. 56 f. (basic information; issue volume [in notes]; references).
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