Anti-dilution Adjustment Formulas in Convertible Bonds


Summary

This practice note discusses anti-dilution adjustment formulas, also known as conversion price adjustments, for convertible bonds. Convertible bonds are hybrid securities with both debt and equity features that are issued by companies seeking to take advantage of the lower interest rates assigned to these securities and/or the potential to sell equity at a premium relative to current levels. This practice note provides an overview of the meaning of equity dilution and discusses the different types of anti-dilution adjustment formulas, as well as the make-whole adjustment for convertible bonds.