Because of the conversion feature, investors get about two-thirds of the yield they would on comparable junk bonds.
The equity participation comes in the conversion feature, which allows the bond to be exchanged for a specified number of common shares.
Because of the sector's pariah status, busted convertibles are now unusually cheap, compared with junk bonds without conversion features.
(Issues of debt securities with similar conversion features are also growing more common, and pose similar risks.)
Investors would benefit from the conversion feature of Lyons, only if the company's stock price rose appreciably faster than the interest rate on the securities.
Reverse convertibles in that respect could be seen as a variation of a Mandatory bearing a contingent conversion feature based.
Institutional lenders regularly trade off current interest for such an option, known in the industry as a conversion feature because it converts the lender into an owner.
On a normal bond issue, with no conversion feature, Navistar would have paid about 11 percent.
Because of the conversion feature, investors get about one-third less in the way of yield than they would receive on comparable bonds.
One attractive element to watch out for is a "conversion" feature, which lets card holders convert the account to unsecured status after a specified time.
