Convertible Preferred or Convertible Debt |
Equity-linked security structured as preferred stock or subordinated debt. The security is issued as a private placement with an agreement to register the underlying shares as soon as possible after the transaction closes. Provides an investor with a senior position relative to the common shareholders as well as current income in the form of a dividend or coupon. Provides an issuer with broad flexibility with regard to structure and the ability to issue stock at a premium to a straight common stock alternative. Issuers should understand that convertible transactions tend to cause “overhang” in the market, i.e., the downward pressure on stock prices due to the existence of a sizeable block of securities that will be released into the market. Depending on the structure, consideration should also be given to rating agency treatment and senior debt covenants, if applicable. |
Equity Credit Line |
A contractual agreement between an issuer and investor that enables the investor to purchase a formula-based quantity of stock at set intervals of time, typically monthly, at future stock prices. Formulas tend to be based on trading liquidity. An effective registration statement must be maintained in order for drawdowns to be completed. |
