Bond With Attached Warrant

A combination of a traditional bond or note and a call warrant on shares of the issuing firm. The warrant usually can be traded separately after the underwriting period. The structure differs from the traditional convertible bond in that the life of the warrant continues in the event the bond is called. Usually, the valuation of the bond with attached warrant is slightly different from that of a convertible bond, because the issuer's bond call provision would be used on the straight bond under different circumstances than it would be used to call a convertible bond. The interest rate on the bond will be below straight bond market rates at issuance because of the value of the warrant, making an early bond call unlikely.

Glossary * B