, Columnist
A 67% Return Will Make a Lot of Converts
Issuance of bonds that turn into equity has soared, as companies tap an easy source of funding and investors seek yield.
Alive and well, for now.
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In a world caught between bulls and bears, convertible bonds can please both camps. As coupon-paying securities, they provide income like a bond. But they turn into equity if an issuer’s stock rises by a set amount, so investors can taste some of the upside, too.
In China, convertible bonds are by no means a compromise; they can offer mouth-watering capital gains that make you wonder if such a win-win situation can last. A year ago, Hong Kong-listed China Yuhua Education Corp. raised $120 million from a 363-day note. It’s now rewarding investors with a 67% return.