mandatory convertible security

Mandatory Convertible

A bond that must be converted into common stock in the company issuing it on or before a certain date. An advantage of a mandatory convertible to the investor is the fact that it guarantees a certain return up to the conversion date, after which there is no guaranteed return but the possibility of a much higher return. A publicly-traded company issues mandatory convertibles when it needs to raise the capital provided by issuing stock, but when doing so would put a strain on the price of existing shares.

mandatory convertible security

A debt security that automatically converts to another security, generally shares of common stock, on a specified date. A mandatory convertible differs from most convertible securities in that it does not permit the owner to choose whether or not to convert.