THE INVESTMENTS THE BANKS STOPPED OFFERING

Bonds 

Convertible bonds are most often issued by companies with a low credit rating and high growth potential.

They are also considered debt security because the companies agree to give fixed or floating interest rate as they do in common bonds for the funds of investor.

To compensate for having additional value through the option to convert the bond to stock, a convertible bond typically has a coupon rate lower than that of similar, non-convertible debt.

 

As an investor you receive the potential upside of conversion into equity while protecting downside with cash flow from the coupon payments and the return of principal upon maturity. 

From the issuer's perspective, the key benefit of raising money by selling convertible bonds is a reduced cash interest payment.

 

The advantage for companies of issuing convertible bonds is that, if the bonds are converted to stocks, companies' debt vanishes.

 

However, in exchange for the benefit of reduced interest payments, the value of shareholder's equity is reduced due to the stock dilution expected when bondholders convert their bonds into new shares.