Convertible Debentures Essay Example | Topics and Well Written Essays - 250 words

Convertible Debentures - Essay Example Some small companies are not able to meet the financial parameters for raising equity; thus, convertible debentures are issued instead of selling shares of stocks (Market Outbox par.3). Another motive of corporations for issuing convertible debentures is that they are able to raise equity without giving up control of ownership until such time that the debentures are converted into shares of stock. Furthermore, with debentures, the assets of the company will not be tied up unlike other forms of debt which require assets as collateral for the loan (Business Finance ,par.2). It is believed that issuing convertible debentures is a good alternative for companies who want to raise capital in short term intervals. It is win-win solution for both the issuer and the investor. It is attractive to investors because of the guaranteed interest payments and an option to convert to equity if the price of the stocks goes up. The company on the other hand is able to enjoy lower interest payments and can offer their shares at a premium based on the present value in the