What is a Synthetic Convertible Bond?

What is a Synthetic Convertible Bond?

James Eves

30 years: Equity capital markets

James speaks on synthetic convertibles and their most common form. He briefly touches on Glencore’s 2018 issuance of $500 million in synthetic convertibles.

James speaks on synthetic convertibles and their most common form. He briefly touches on Glencore’s 2018 issuance of $500 million in synthetic convertibles.

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What is a Synthetic Convertible Bond?

2 mins 50 secs

Overview

An instrument where the issuer has sold a convertible bond in the equity-linked market and bought a matching call option from one or more banks. The result is, the issuer is left with a simple profile of straight debt.

Key learning objectives:

  • Define a Synthetic Convertible

  • Describe how an issuer can hedge its exposure using options

  • Explain why issuers hedge, and give an example of this.

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Summary
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