What is a Convertible Bond?
A convertible bond is a tradable debt that can be converted into a predetermined amount of the company's equity during its life.
In the case of Electra, £100 million of Convertible Bonds were raised in December 2010. Each bond was priced at £1,000 per bond and generates 5% interest per annum.
Bondholders can convert their bonds into Electra shares at any time within the life of the bond (expires 2017) at an initial conversion price of 2,050p. The Convertible Bond is listed on the London Stock Exchange and can be traded like other listed securities.
Unlike the ZDPs, the Convertible Bondholders receive annual income through interest payments.
In the unlikely event of Electra winding up, the Bondholders would rank above the ordinary shareholders in terms of being entitled to the capital of Electra.