Mandatory Convertible


DEFINITION of 'Mandatory Convertible'

A type of convertible bond that has a required conversion or redemption feature. Either on or before a contractual conversion date, the holder must convert the mandatory convertible into the underlying common stock.

These securities provide investors with higher yields to compensate holders for the mandatory conversion structure.

BREAKING DOWN 'Mandatory Convertible'

These are often used when a traditional equity issuance would otherwise place severe market pressure on the underlying stock.

  1. Convertible Preferred Stock

    Preferred stock that includes an option for the holder to convert ...
  2. Convertible Bond

    A bond that can be converted into a predetermined amount of the ...
  3. Convertibles

    Securities, usually bonds or preferred shares, that can be converted ...
  4. Contingent Convertibles - CoCos

    A security similar to a traditional convertible bond in that ...
  5. Common Stock

    A security that represents ownership in a corporation. Holders ...
  6. Conversion Price

    The price per share at which a convertible security, such as ...
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