Advantages Disadvantages for the Issuing Institution

• There is an improvement in the financial structure of the company, because the extra resources (debentures) are transformed into own resources (shares). It transforms debt into capital.
• The financial cost is lessening, because if the investor chooses for the conversion they don’t have to obey the requisites from the debentures: to pay interests and to refund the capital. On the other side, the interests from the debentures or bonds are usually lower than that on the market, this way, in case of not converting, the company will finance itself with cheap debt.
• The sooner the conversion is made, the greater are the discounts, so the lesser are the numbers of shares that you can obtain with each debenture.

Disadvantages for the Issuing Institution

• You can’t foresee an exact dividend distribution politic due that existing amounts of shares swill depend on the number of debentures that will exercise their option of conversion.
• There are doubts when you can’t calculate the interests of the debentures. Again, the number of securities to be converted is unknown or unknown of the amount of funds to be returned with the amortizations.

Beginner Money Investing Private Debentures Advantages & Disadvantages for the Issuing Institution Advantages & Disadvantages for the Investor