The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

The return of the mandatory convertible

www.breakingviews.com

Remember mandatory convertible bonds? Bonds that automatically convert into shares acquired a dubious reputation when they were last issued in large numbers back in 2002. Yet they have staged a big comeback this year.

JPMorgan has just sold €1.6 billion of bonds that will be repaid in the shares of German insurer Allianz. UBS has sold €700 million of bonds that will be exchanged for shares in car maker DaimlerChrysler. And Fortis, the Dutch banking and insurance group, has sold $700 million of bonds that will be exchanged for shares in Assurant, a US insurer it used to own. That adds up to almost €3 billion of issuance in just a month.

Investors have clearly got over an aversion to these bonds that led to a hiatus in issuance. That occurred after the last wave provoked an angry response from shareholders. French media group Vivendi Universal and French telecoms equipment maker Alcatel sold mandatories during the bear market of 2002. These deals were controversial as they were effectively rights issues in disguise.

Securities with a stigma

The VU and Alcatel bonds had two important features in common.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree