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A conversion loan (English exchangeable bond) is a loan, those additionally to the annual fixed interest payment the investor the right gives the loan at any time into a firm to exchange given number from shares to. Contrary to the conversion loan the emitter of the conversion loan is not the enterprise, which emits the which are the basis shares, but typically (large) a shareholder.
Enterprises, which would like themselves to separate from a block of shares, use gladly conversion loans as financing instrument. The right of the investor to exchange the loan becomes particularly valuable for the investor, if the which is the basis share rises before expiration of the loan over the practice price of the call option. For the emitter this brings the advantage that he (due to this course chance of the investors) can platzieren the loan with lower interest charges. The financing becomes to that extent thus cheaper for the emitter, whereby this must do however for his part without the course chance of the underlying securities.
The investor receives annual interest payments. The moreover one the investor participates on the one hand automatically at profits on exchange of the share. On the other hand he gets the nominal value disbursed at the end of the running time, if he did not exchange the loan. Thus the loan possesses a certain capital protection.
Conversion loans are for German revenue offices financial innovations. Thus it applies to the case of sale and also for the following redemption that the taxation has to take place in principle after the emission net yield. If this net yield is not provable, becomes the entire obtained profit, which pays duty market net yield so mentioned.
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