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"Why do firms issue convertible bonds?" A convertible bond is a bond that gives the holder the right to 'convert' or exchange the par amount of the bond for common shares of the issuer at some fixed ratio during a particular period. As bonds, they have some characteristics of debt securities. However, their conversion element also gives them features of equity securities. This report aims to answer the above question by first introducing what convertible bonds are and how they work. I will then move on to discuss why firms issue convertible debt by presenting the argument for convertible debt, and then the case for common stock. Subsequently, I will consider what kind of firm issues convertible bonds and the rationale for issuing them. The report will conclude by summarising the report and giving my opinion as to what type of firm would typically issue convertible debt. Warrants, convertible bonds and exchangeable securities...

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