Hybrid Securities typically refer to securities that display
both debt like and equity like characteristics.
They have been around for some 20 years, first originating in
the form of listed convertible notes which paid a fixed rate of
interest for a period of time before converting into a fixed number
of ordinary shares on a conversion date (often subject to a floor).
This meant that investors received a fixed interest like income
stream until maturity then received the benefit of any capital
appreciation on the underlying shares over the term.
As corporate tax laws changed, the original style convertible
notes no longer became attractive for corporations to issue. Soon a
new style of hybrids emerged known as Income Securities. These
Securities which paid a floating rate return above the 90 day bank
bill swap rate became popular at the start of this century.
Examples include National Australia Bank Income Securities (NABHA)
and Macquarie Bank Income Securities
