This article appears courtesy of International Securities Finance magazine
Convertible bonds last year were faced with no choice but to deleverage their portfolios with the ban of short selling, and the seizing up of the credit markets cutting off their supply of debt finance, whilst losses in other parts of their businesses meant they had to reduce the size of their positions. The nationalisation of the two US mortgage providers, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) and the bankruptcy of Lehman Brothers were particularly significant as they were significant issuers and holders of convertible preferred shares.
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