Avoiding the death spiral of converts

The Canadian marketplace is home to over $14 billion in publicly traded convertible debentures. It’s no wonder the appeal is growing ‒ convertible debentures allow issuers to take advantage of lower cash costs and high yield potential, and they also give investors the opportunity to earn current income without giving up the prospect of capital growth. Despite the advantages, there remains fundamental risks of issuing and owning these complex hybrid products.  

Failure to refinance, significant shareholder dilution and even formal restructuring are some of the realities that Canadian companies face today by failing to properly manage pending debt maturities. With careful management and strategic options analysis, debt crises can be averted before they reach a head. 

Whether you’re considering issuing convertible debentures or looking to refinance your existing convertible debentures, there are options that should be examined to determine an approach that is best suited to you. 

To read more about Deloitte’s approach to convertible debentures, download our report.

Authors

Michael McTaggart
Manager, Financial Advisory Services
mmctaggart@deloitte.ca

Fady Nakhla
Manager, Financial Advisory Services
fnakhla@deloitte.ca

Sam Furphy
Manager, Financial Advisory Services
safurphy@deloitte.ca

Joshua Beaver
Manager, Financial Advisory Services
jobeaver@deloitte.ca