Mandatory Convertible

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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.

INVESTOPEDIA EXPLAINS 'Mandatory Convertible'

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

RELATED TERMS
  1. Convertible Preferred Stock

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  2. Convertible Bond

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  3. Busted Convertible Security

    A convertible security that is trading well below its conversion ...
  4. Convertibles

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  5. Contingent Convertibles - CoCos

    A security similar to a traditional convertible bond in that ...
  6. Conversion Price

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