What is a 'Mandatory Convertible'
A mandatory convertible is 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.