Exchanges Alter View On 20% Rule For Convertible Bonds

Bankers who originate convertible bonds issued and companies interested in issuing convertible bonds received a rare regulatory win a couple of months ago. Nasdaq and the New York Stock Exchange altered their views about how their rules apply to convertible bonds. The new views remove a potential obstacle to U.S. public companies seeking convertible bond financing. The changes specifically affect companies doing Rule 144A offerings where the number of shares underlying the convertible bonds exceeds 20% of the outstanding shares.

The convertible bond market for public companies is on pace for its best year since 2007 (though if it keeps that pace it will still raise only half as much as it did in '07). From the beginning of 2014 to May 8, 2015, there have been 128 deals (excluding mandatories and convertible preferreds); three-quarters of them are private placements under Rule 144A rather than registered public offerings. Also, most of those deals give the issuer of