What are Corporate Hybrids?

What are Corporate Hybrids?

In this video Tim covers hybrid securities and explains why issuers use them.
Overview

Corporate hybrids are subordinated capital that shares features with both debt and equity. Corporate hybrids resemble debt in that it offers high yields paid regularly, and a call option. They resemble equity in that they have no maturity date, or at least a very long maturity date, and have no obligation to pay interest.

Key learning objectives:

  • Explain how corporate hybrids resemble both debt and equity

  • Explain the benefits issuers and investors gain from corporate hybrids

  • Describe the risks investors face when purchasing corporate hybrids

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