Exchangeable Debt

Brad Barber

Financial Management, 1993, vol. 22, issue 2

Abstract: Exchangeable debt gives the purchaser the option to exchange the debt for stock of a second company, referred to as the "convert" firm. For example, in March of 1985, Petrie Stores issued $150 million of exchangeable callable debt, due in 2010. The exchange feature enabled the purchaser of the debt to exchange each $1000 face value of debt for just over 27 shares of Toys "R" Us common stock. Petrie Stores owned a minority interest in Toys "R" Us and deposited a sufficient number of Toys "R" Us common with an escrow agent to guarantee the exchange option.

Date: 1993
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