Serious Singapore-based firm starts fund to buy 'death spiral' convertibles

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Such bonds get bad rap for dilutive nature; but Advance Capital says fund takes on huge risks partnering issuers in dire straits

The firm and its fund specialises in convertible bonds that have been called "death spiral convertibles" because of their dilutive impact on the underlying shares. Under Advance Capital's programme, a listed company that is in need of funds will issue to Advance Capital convertible notes that are convertible into new shares of the company at a fixed discount to the current market price. Because the notes set the conversion discount, and not the price, some notes have the potential to create a runaway negative impact on the underlying stock as each round of conversion gets even more dilutive.

http://www.businesstimes.com.sg/bank...les#xtor=CS1-3


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