High Yield Reverse Convertible Notes

Reverse convertible bonds give the issuer the right, but not the obligation, to convert the bond's principal into shares of equity prior to a pre-determined date. This option is exercised if the shares underlying the option have fallen below a set price, in which case the bondholders will receive the equity rather than the principal and any additional coupons. The yield on this type of bond is higher than a similar bond without the reverse option.

An example of a reverse convertible bond is a bond issued by a bank on the bank's own debt with a built-in put option on the shares of a publicly traded company. The bond may have a stated yield of 10-20%, but if the shares in the underlying company decrease substantially in value, the bank holds the right to issue the shares to the bondholder, instead of paying cash at the bond's maturity.

Reverse Convertible Notes are suitable to the investor who, guided by their APS Financial Representative, understands the risks and opportunities offered by High Yield Reverse Convertible Notes.