An Alternative Financing Tool: Convertible Bonds

Given the current macroeconomic outlook and the solid impacts of COVID-19 on the Turkish market, it has become much harder for Turkish companies to satisfy their financing needs by accessing conventional financing sources with lower interest rates. Convertible bonds may be considered as an attractive financing instrument for these companies and become an alternative path to raise the capital.

Under Turkish law, convertible bonds are regulated under Communique on Debt Instruments numbered VII-128.8 (the "Communique") issued by the Capital Markets Board of Turkey (the "CMB"). Under the Communique, the convertible bond is defined as a debt instrument that grants its holder an option to either convert such bond into new shares in the issuer company's share capital at a prescribed conversion price for a certain conversion period, or to receive the bond's principal and the accrued interest. In that sense, convertible bonds can be classified as a hybrid