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EQUITY WARRANT BOND (DEBT-WITH-EQUITY WARRANTS)

Statistics Directorate    
Definition:
Equity warrant bonds are debt securities that incorporate warrants, which give the holder the option to purchase equity in the issuer, its parent company, or another company during a predetermined period or on one particular date at a fixed contract price.

Context:
The warrants are detachable and may be traded separately from the debt security. The exercise of the equity warrant will normally increase the total capital funds of the issuer because the debt is not replaced by equity but remains outstanding until the date of its redemption. The issue of equity warrant bonds reduces the funding costs for borrowers because the investor will generally accept a lower yield in anticipation of the future profit to be gained from exercising the warrant.

Source Publication:
IMF, 2003, External Debt Statistics: Guide for Compilers and Users – Appendix 1. Special financial instruments and transactions: classifications, IMF, Washington DC.

Hyperlink:
http://www.imf.org/external/pubs/ft/eds/Eng/Guide/index.htm

Statistical Theme: Financial statistics

Created on Friday, August 29, 2003

Last updated on Friday, August 29, 2003