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Convertible debt

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Many of the small "dot-com" companies got financing in the form of an instrument called convertible debt. This is like ordinary debt, in that it pays a regular interest amount. But debtholders have the right to convert it to equity.

Why do you think these companies chose this instrument? Do you think it was a good idea?

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Many of the small "dot-com" companies got financing in the form of an instrument called convertible debt. This is like ordinary debt, in that it pays a regular interest amount. But debt-holders have the right to convert it to equity.
Why do you think these companies chose this instrument? Do you think it was a good idea?
First, it was the financiers that chose this method of financing. Convertible debt was selected because if the small "dot-com" company went into liquidation or becomes bankrupts the lenders have the convertible debt note which is secured against the "dot-com" company's assets. The result is that lender has preferential treatment when assets are distributed. Further, when the convertible debt (promissory) ...

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