THE PRIVATE PLACEMENT OF CONVERTIBLE DEBT: A FEW OBSERVATIONS FROM THE US MARKET

Using a sample of over five hundred convertible debt issues carried out by non-financial American firms between 2004 and 2014, this paper identifies the motives for selling convertible bonds through private offerings by companies in good financial standing. The empirical examination, including the analysis of main issue parameters and selected proxies for financial performance and growth opportunities of the issuers, indicates that profitable firms that issue private convertibles are medium, undervalued companies which are likely to raise hybrid capital as a cheaper substitute for common equity to finance their investment process. They presumably place convertible debt in the private market in order to speed up raising funds, to avoid high flotation costs of selling new securities publicly and to control their future shareholders structure.