Forced Conversion

DEFINITION of 'Forced Conversion'

The occurrence of an issuer of a convertible security exercising the right to call the issue, forcing investors to convert their securities into the predetermined number of shares.

BREAKING DOWN 'Forced Conversion'

An issuer will be interested in forcing a conversion if interest rates decline significantly, or if the price of the security underlying the convertible is above the conversion price. Forced conversions are generally detrimental to the holders of the security.