Exchangeable bond
An exchangeable bond (Engl. Exchangeable bond ) is a bond , in addition to fixed annual interest payment to the investor gives the right to the bond at any time in a fixed given number of shares to trade. In contrast to the convertible bond , the issuer of the exchangeable bond is not the company that issues the underlying shares, but typically a (major) shareholder.
Benefits for the issuer
Companies that want to part with a block of shares like to use exchangeable bonds as a financing instrument . The investor's right to convert the bond becomes particularly valuable to the investor if the underlying stock rises above the exercise price of the call option before the bond expires . For the issuer, this has the advantage that he can place the bond with a lower interest rate (due to this price opportunity for investors). In this respect, the financing becomes cheaper for the issuer, who in turn has to forego the price opportunity of the underlying securities.
Advantages for the investor
The investor receives annual interest payments. On the one hand, the investor automatically participates in price gains in the share. On the other hand, he receives the nominal value at the end of the term, provided he has not exchanged the bond. Thus, the bond has a certain capital protection.
Tax treatment of exchangeable bonds in Germany
Exchangeable bonds are financial innovations for German tax authorities . Thus, in the event of a sale and also for the subsequent redemption, the taxation generally has to be based on the issue yield. If this return cannot be proven, the entire profit achieved, the so-called market return, is taxed.
Mandatory exchangeable bond
The MEB is similar to the mandatory convertible bond , a bond, at the end of the term, the shares of the underlying must be purchased on. However, this base value does not correspond to the company's own shares, but to those of an external or often affiliated company. The mandatory exchangeable bond is often chosen by issuers when an existing stake in a company is to be reduced in the medium term. An example of this is the mandatory exchangeable bond issued by Fresenius in July 2008 on the underlying Fresenius Medical Care .
See also
Individual evidence
- ^ Hans Paul Becker: Investment and Financing , 6th edition, Wiesbaden, Springer Gabler Verlag, 2013, p. 232
- ↑ Fresenius SE: Successful placement of mandatory exchangeable bond. In: German Society for Ad Hoc Publicity . July 17, 2008, accessed November 25, 2019 .