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   Mandatory Convertible
   















 

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Mandatory Convertible

An equity-like instrument which provides a higher yield or whose principal is denominated in a stronger currency than the underlying common stock at the time of issuance. On or before a contractual conversion date, the holder must convert this instrument into the underlying common stock. Mandatory convertibles are used when a traditional equity issuance would not be possible without placing severe market pressure on the underlying stock, or because the common stock yield or the stock's native currency is unattractive to potential purchasers. Also called Preferred Purchase Unit, Debt with a Mandatory Common Stock Purchase Contract, Equity Contract Notes, Issuer's Option Bond. See also Latent Call Option.

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