A foreign currency convertible bond (FCCB) is a type of convertible bond issued in a currency different than the issuer’s domestic currency. In other words, the money being raised by the issuing company is in the form of foreign currency. A convertible bond is a mix between a debt and equity instrument.
Who governs the issue of foreign currency convertible bonds?
RBIs[39] Regulatory Framework: The Government of India considers the funds raised through the FCCB issue as Foreign Direct Investment (FDI).
What is an example of a convertible bond?
For example, consider a Company XYZ bond with a $1,000 par value that is convertible into Company XYZ common stock. It has a coupon of 6%, payable annually. By this time, the stock price has risen to $75 per share. The bondholder converts his bond to 20 shares at $75 per share, and now his investment is worth $1,500.
Are convertible bonds considered equity?
A convertible bond is a fixed-income corporate debt security that yields interest payments, but can be converted into a predetermined number of common stock or equity shares. The conversion from the bond to stock can be done at certain times during the bond’s life and is usually at the discretion of the bondholder.
Are FCCBs issued in home currency?
FCCBs are issued in currencies different from the issuing company’s domestic currency. Corporates issue FCCBs to raise money in foreign currencies. These bonds retain all features of a convertible bond, making them very attractive to both the investors and the issuers.
What makes a foreign currency convertible bond special?
Foreign currency convertible bonds (FCCBs) are a special category of bonds. FCCBs are issued in currencies different from the issuing company’s domestic currency. Corporates issue FCCBs to raise money in foreign currencies. These bonds retain all features of a convertible bond, making them very attractive to both the investors and the issuers.
How are convertible bonds denominated in Indian rupees?
(4) The Foreign Currency Convertible Bonds shall be denominated in any convertible foreign currency and the ordinary shares of an issuing company shall be denominated in Indian rupees.
When do you get paid on a convertible bond?
A bond is a debt instrument that provides income to investors in the form of regularly scheduled interest payments called coupons. At the maturity date of the bond, the investors are repaid the full face value of the bond. Some corporate entities issue a type of bond known as convertible bonds.
Is it safe to issue bonds in foreign currency?
Issuing bonds in foreign currency in a foreign market may always be exposed to a legal, political and economic risk of that foreign country. One may have much better idea about the macro-economic conditions of the home country compared to those in a foreign country.
