Compulsory Convertible Debenture - CCD

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DEFINITION of 'Compulsory Convertible Debenture - CCD'

A type of debenture in which the whole value of the debenture must be converted into equity by a specified time. The compulsory convertible debenture's ratio of conversion is decided by the issuer when the debenture is issued. Upon conversion, the investors become shareholders of the company.

BREAKING DOWN 'Compulsory Convertible Debenture - CCD'

The main difference between convertible debentures and other convertible securities is that owners of the debentures must convert their debentures into equity, whereas in other types of convertible securities, the owner of the debenture has an option.

Some CCDs, which are usually considered equity, are structured in a manner that makes them more like debt. Often, the investor has a put option which requires the issuing companies to buy back shares at a fixed price.

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