Question

Considering to ordinary secured loan notes, which of the following statements is true when considering convertible secured loan notes?

Select one:

a. Likely to be more expensive to service because of their equity component

b. Likely to be less expensive to service because of their equity component

c. Likely to be more expensive to service because converting to equity requires the holders to make additional payments

d. Likely to be less expensive to service because they must rank after ordinary secured loan stock

Answer 1

Option b)

Likely to be less expensive to service becuse of their equity component

Convertable secured loan note is a type of short term debt. later period it can be converted in to equity at the option of holder at discount price. Option holders get equity shares at discount price when compare to others. If the holder intention is to convert these notes into equity, definatly he will get at dicount price

These notes are secured by collateral security of such borrower asset.

so it will be less expensive and profitable to the convertable secured loan note holder