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Exchangeable Debt

Author

Listed:
  • Brad M. Barber

Abstract

Exchangeable debt gives the purchaser the option to exchange the debt for stock of a second company, referred to as the "convert" firm. For example, in March of 1985, Petrie Stores issued $150 million of exchangeable callable debt, due in 2010. The exchange feature enabled the purchaser of the debt to exchange each $1000 face value of debt for just over 27 shares of Toys "R" Us common stock. Petrie Stores owned a minority interest in Toys "R" Us and deposited a sufficient number of Toys "R" Us common with an escrow agent to guarantee the exchange option.

Suggested Citation

  • Brad M. Barber, 1993. "Exchangeable Debt," Financial Management, Financial Management Association, vol. 22(2), Summer.
    • Handle: RePEc:fma:fmanag:barber93
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    Cited by:

    1. Anna Danielova & Scott Smart, 2012. "Stock Price Effects of Mandatory Exchangeable Debt," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 18(1), pages 40-52, February.
    2. Mateti, Ravi S. & Hegde, Shantaram P. & Puri, Tribhuvan, 2013. "Pricing securities with multiple risks: A case of exchangeable debt," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 1018-1028.
    3. Ammann, Manuel & Fehr, Martin & Seiz, Ralf, 2006. "New evidence on the announcement effect of convertible and exchangeable bonds," Journal of Multinational Financial Management, Elsevier, vol. 16(1), pages 43-63, February.
    4. Benjamin Kleidt & Eckhard Scharmer & Dirk Schiereck, 2009. "Desinvestitionen von Aktienpaketen — Eine Analyse von Exchangeable Bonds," Schmalenbach Journal of Business Research, Springer, vol. 61(7), pages 738-780, November.
    5. William Gentry & David M. Schizer, 2002. "Frictions and Tax-Motivated Hedging: An Empirical Exploration of Publicly-Traded Exchangeable Securities," NBER Working Papers 9243, National Bureau of Economic Research, Inc.
    6. Danielova, Anna N. & Smart, Scott B. & Boquist, John, 2010. "What motivates exchangeable debt offerings?," Journal of Corporate Finance, Elsevier, vol. 16(2), pages 159-169, April.

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