전환증권 보유자의 전환권 보호

초록

This Article examines how to protect the conversion rights of convertible security holders. Holders of convertible securities, such as convertible bonds and convertible preferred stocks, typically receive a lower yield on those securities in exchange for receiving conversion rights. These rights allow the holder to convert his convertible securities into shares of the company’s common stock at a conversion price specified in his contract. If the company succeeds going forward, the trading price of its common shares will eventually rise above the conversion price. This makes conversion attractive because convertible security holders can convert their shares into common stock at a below-market price per share. It is crucial, therefore, to protect through contract the benefits conversion rights confer. Special provisions are inserted into the convertible security contract to protect the value of conversion rights when the company engages in certain actions that affect its common stock. The goal of these protective provisions is to preserve the benefit of the convertible security holders’ bargain as reflected in their contract. This Article reviews and analyzes these contractual methods, such as anti-dilution provisions and anti-destruction provisions, to provide appropriate protection to the holders of convertible securities.

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