Highly rated companies were once frequently seen on the US convertible bond circuit. But that ended in 2008 when accounting authorities ruled that issuers would be required to bifurcate convertible bonds. Essentially, they said (correctly), a CB is two things - a bond and an equity option, and the costs of those components had to be reflected on the income statement and balance sheet. But they then decreed (much less sensibly) that the bond component of a CB had to be expensed as though it was straight debt - ignoring the actual coupon (or lack of one) paid. As a result, when coupons plummeted as interest rates moved to historically low levels, it made less sense for investment-grade and crossover names to issue converts. They were often paying zero in interest costs on CBs but had to account for them as if they were paying a coupon. And investment-grade issuers were more or less entirely absent from the US converts market as a result. The Financial Accounting Standards Board has now finally reversed course, reverting to the old rules at the start of this year.
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