| 词条 | Hybrid security |
| 释义 |
Hybrid securities are a broad group of securities that combine the characteristics of the two broader groups of securities, debt and equity. Hybrid securities pay a predictable (fixed or floating) rate of return or dividend until a certain date, at which point the holder has a number of options, including converting the securities into the underlying share. Therefore, unlike with a share of stock (equity), the holder enjoys a predetermined (rather than residual) cash flow, and, unlike with a fixed interest security (debt), the holder enjoys an option to convert the security to the underlying equity. Other common examples include convertible and converting preference shares. A hybrid security is structured differently than fixed-interest securities. While the price of some securities behaves more like that of fixed-interest securities, others behave more like the underlying shares into which they may convert. Examples
Important terms
Traditional hybridsTraditional hybrids were usually structured in a way that leads the securities to react to the underlying share price. Although each has individual characteristics, typically:
Note: This fixed conversion ratio means the price of these hybrids react to the movement in the underlying share price. (The extent of the co-relation is sometimes referred to as a delta, and these typically have a delta of between 0.5 and 1) In addition, some of these securities include minimum and maximum conversion terms, effectively giving the holder a put and call option if the share price reaches a certain prices. Style of hybridsMost of the hybrid securities issued since 2005 are very bond-like. Although each has individual characteristics, typically:
UsageHybrid securities have skyrocketed in popularity since Moody's released a new set of guidelines for treating debt-equity hybrids in February 2005. The new guidelines establish a "debt-equity continuum" and allow institutions to classify part of the hybrid security as equity and part as debt (in a shift from the previous policy, that counted the entire amount as debt). This change allowed companies to issue hybrid securities at a time of record low interest rates (and thus gain access to cheap capital) and then use the proceeds to repurchase equity shares (which have a very high cost of capital). Since only a fraction of the recapitalization would be listed as debt on the balance sheet, hybrids allowed companies to repurchase more shares than previously without negatively affecting their credit rating. Basket D securityThe most popular hybrid among financial institutions (banks and insurance companies) is the Basket D security. Basket D is a reference to a point on Moody's debt-equity continuum scale that treats the hybrid as 75% equity and 25% debt. In order to qualify, the security must give the issuer the right (or even the obligation) to roll-over the security at expiry to an indefinite or long maturity bond and to suspend dividends (effectively coupon payments, but to reflect the equity nature of the security, the term "dividend" is used). Most Basket D issuances have been structured in a way that also preserves the tax deductible nature of their interest payments, avoiding double taxation/customs. See also
References1. ^{{cite news |title=Introduction to Canadian Convertible Debentures |publisher=Voya Vasiljevic, ScotiaMcLeod |date=March 15, 2009 |url=http://www.ritceyteam.com/pdf/IntroToConverts_ClientFriendly.pdf |accessdate=March 15, 2009 |deadurl=yes |archiveurl=https://web.archive.org/web/20090318052924/http://www.ritceyteam.com/pdf/IntroToConverts_ClientFriendly.pdf |archivedate=March 18, 2009 |df= }} 2 : Securities (finance)|Financial markets |
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