Exchangeable bond

An exchangeable bond (English exchangeable bond) is a bond that in addition to the fixed annual interest payment to the investor is the right to exchange the bond at any time into a fixed, given number of shares. In contrast to the convertible bond, the issuer of the exchangeable bond is not the company that issues the underlying shares, but typically a (large) shareholder.

Benefits for the issuer

Companies that wish to get rid of a block of shares, like to use exchangeable bonds as a financing tool. The investor's right to convert the bond, is particularly valuable for the investor if the underlying stock rises before the end of the bond over the exercise price of the call option. For the issuer, this has the advantage that it (because this course chance of investors ) can place the bond at a lower interest rate. The funding is so far so cheaper for the issuer, and this, in turn, but must renounce the course chance of the underlying securities.

Benefits for Investors

Investors will receive annual interest payments. Furthermore, the investor automatically participates in part to gains of the stock. Secondly, he gets at the end of the term of the nominal value paid, unless he has changed the bond. Thus, the bond has a certain capital.

Tax treatment of exchangeable bonds in Germany

Exchangeable bonds are financial innovations for German tax authorities. Thus true for the case of disposal and also for the subsequent encashment, that taxation is generally reported in terms of emissions returns. Is undetectable this return, the entire profit generated, the so-called market returns, taxed.

MEB

The MEB is similar to the mandatory convertible bond, a bond, in which at the end of the term, the shares of the underlying asset must be acquired. However, this does not correspond to the underlying treasury shares, but those of a strange or often associated company. The MEB is of issuers often chosen when an existing holding in a company is to be reduced in the medium term. An example of this is emitted in July 2008 by Fresenius mandatory exchangeable bond on the underlying Fresenius Medical Care