Explore BrainMass
Share

Explore BrainMass

    Convertible debt

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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?

    © BrainMass Inc. brainmass.com October 10, 2019, 2:33 am ad1c9bdddf
    https://brainmass.com/business/entrepreneurial-issues/382780

    Solution Preview

    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) ...

    Solution Summary

    This solution gives you strong points concerning Convertible debt

    $2.19