What is a Foreign Currency Convertible Bond (FCCB)?
A Foreign Currency Convertible Bond (FCCB) is a type of convertible bond issued in a currency different than the issuer’s domestic currency. In other words, the money being raised by the issuing company is in the form of a foreign currency. It gives two options. One is, to get the regular interest and principal and the other is to convert the bond in to equities. It is a hybrid between bond and stock. How does it help companies? Some companies, banks, governments, and other sovereign entities may decide to issue bonds in foreign currencies because: • It may appear to be more stable and predictable than their domestic currency. • It gives issuers the ability to access investment capital available in foreign markets. • Companies can use the process to break into foreign markets. • The bond acts like both a debt and equity instrument. Like bonds it makes regular coupon and principal payments, but these bonds also give the bondholder the option to convert the bond into stock. • It is a low
