Neither the sale of the Common Units nor the sale of the Preferred Units is conditioned upon the other. The Partnership expects to use the aggregate net proceeds from the sale of the Preferred Units and the Common Units for general partnership purposes, including the repayment of debt and the funding of growth capital expenditures. The purchasers have agreed to purchase the balance of the Preferred Units at a second closing, scheduled to occur on July 13,
FINRA is reissuing this alert on the heels of its enforcement action related to supervisory failures resulting in the sale of unsuitable reverse convertibles. The alert Convertible debt the numerous risks associated with reverse convertibles, including their often complex features.
Over the past few years, brokerage firms and banks have been issuing and marketing complex investments known in the industry as "structured products" to individual Convertible debt.
These include "reverse convertibles," which are popular in part because of the high yields they offer. Also known as "revertible notes" or "reverse exchangeable securities"—and sold under a variety of proprietary names that may or may not use the term "structured" to describe the product—reverse convertibles are debt obligations of the issuer that are tied to the performance of an unrelated security or basket of securities.
Although often described as debt instruments, they are far more complex than a traditional bond and involve elements of options trading. Reverse convertibles expose investors not only to risks traditionally associated with bonds and other fixed income products—such as the risk of issuer default and inflation risk—but also to the additional risks of the unrelated assets, which are often stocks.
FINRA is issuing this alert to inform investors of the features and risks of reverse convertibles. They are complex investments that often involve terms, features and risks that can be difficult for individual investors and investment professionals alike to evaluate.
If you are considering a reverse convertible, be prepared to ask your broker or other financial professional lots of questions about the product's risks, features and fees and why it's right for you.
What Is a Reverse Convertible? A reverse convertible is a structured product that generally consists of a high-yield, short-term note of the issuer that is linked to the performance of an unrelated reference asset—often a single stock but sometimes a basket of stocks, an index or some other asset.
The product works like a package of financial instruments that typically has two components: When you purchase a reverse convertible, you're getting a yield-enhanced bond. You do not own, and do not get to participate in any upside appreciation of, the underlying asset.
Instead, in exchange for higher coupon payments during the life of the note, you effectively give the issuer a put option on the underlying asset. You are betting that the value of the underlying asset will remain stable or go up, while the issuer is betting that the price will fall.
In the typical best case scenario, if the value of the underlying asset stays above the knock-in level or even rises, you can receive a high coupon for the life of the investment and the return of your full principal in cash.
In the worst case, if the value of the underlying asset drops below the knock-in level, the issuer can pay back your principal in the form of the depreciated asset—which means you can wind up losing some, or even all, of your principal offset only partially by the monthly or quarterly interest payments you received and the ownership of shares in the devaluated asset.
A reverse convertible might make sense for an investor who wants a higher stream of current income than is currently available from other bonds or bank products—and who is willing to give up any appreciation in the value of the underlying asset.
But, in exchange for these higher yields, investors in these products take on significantly greater risks. How Do Reverse Convertibles Work? The interest or "coupon rate" on the note component of a reverse convertible is usually higher than the yield on a conventional debt instrument of the issuer—or of an issuer with a comparable debt rating.
For example, some recently issued reverse convertibles have annualized coupon rates of up to 30 percent.
A reverse convertible's higher yield reflects the risk that, instead of a full return of principal at maturity, the investor could receive less than the full return of principal if the value of the unrelated reference asset falls below the knock-in level the issuer sets.Drop Top Customs by Convertible Builders LLC.
Drop Top Customs was originally founded in as “Coachbuilders Limited,” has over 41 years of experience.
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It’s been a while since I’ve written a substantive post. (I started writing this post in September , but only got around to finishing it.).
Jun 19, · Summary: Convertible debt is often the best choice for a seed round. It is convenient, cheap, and quick. It lets you close the financing quickly and turn your focus back to your customers—that’s good for the company and its investors.. When your business is very young, raising a seed financing ($50K-$K) via convertible debt is a great alternative to selling equity.
Publicly traded technology companies have been issuing bonds that convert into equity at a pace unseen since the height of the dot-com bubble as demand for tech stocks surges.
Companies issue corporate bonds (or corporates) to raise money for capital expenditures, operations and acquisitions. Corporates are issued by all types of businesses, and are .