Listen to a Business English Dialogue About High premium convertible debenture
Layla: Hi Evelyn, have you ever heard of high premium convertible debentures?
Evelyn: No, I haven’t. What are they?
Layla: They’re a type of bond issued by a company with a high premium attached, meaning they are sold at a price higher than their face value, and they can be converted into the company’s stock at a predetermined price.
Evelyn: So, it’s like a mix between a bond and a stock?
Layla: Exactly. It offers investors the security of a bond with the potential upside of converting into stock if the company performs well.
Evelyn: That sounds interesting. What are the benefits for the company issuing these debentures?
Layla: Well, they get the benefit of raising capital at a lower interest rate compared to traditional bonds, and it also provides them with the flexibility to raise equity capital if needed through the conversion feature.
Evelyn: Are there any risks for investors with these debentures?
Layla: Yes, there are risks involved. If the company’s stock performs poorly, the value of the debenture could decrease, and investors might not receive the expected returns.
Evelyn: I see. So, it’s important for investors to carefully assess the company’s financial health before investing?
Layla: Absolutely. Conducting thorough research on the company’s financials and prospects is crucial before investing in high premium convertible debentures.
Evelyn: Can these debentures be converted into stock at any time?
Layla: No, there’s usually a specified conversion period and price determined at the time of issuance.
Evelyn: Thanks for explaining, Layla. It’s a complex topic, but I have a better understanding now.
Layla: You’re welcome, Evelyn. If you have any more questions, feel free to ask!