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Finance Dictionary and Glossary of Investment Terms
forced conversion
Definition 1.
An action resulting in the calling in of a convertible security against the will of the holder. Forced conversion is usually undertaken when the price of the underlying stock is well above the conversion price because the resulting transaction strengthens the company's balance sheet.
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Definition 2.
When the issuer of a convertible security exercises their right to call the issue. This forces the investor to convert their security into the predetermined number of shares.
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Definition 3.
Occurs when a convertible security is called in by the issuer, usually when the underlying stock is selling well above the conversion price. The issuer thus assures the bonds will be retired without requiring any cash payment. Upon conversion into common, the carrying value of the bonds becomes part of a corporation's equity, thus strengthening the balance sheet and enhancing future debt capability.
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