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Adjustable Rate Convertible Debt
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(1) A convertible bond with no conversion premium and a coupon equivalent to or linked to the dividend on the underlying common stock. This structure was designed to make dividend equivalents deductible by the issuer. The Internal Revenue Service has held that the coupon on such instruments is paid from after-tax income. (2) A convertible bond or note with a variable (floating rate) coupon set by reference to a standard index rate (e.g., LIBOR).
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Glossary *
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