Academic Scientific JournalsThe Use of Convertible Bonds in Financial Restructuring of Companies Listed on the Warsaw Stock Exchange
Keywords:
corporate finance, financial restructuring, convertible bonds, Warsaw Stock ExchangeAbstract
The aim ofthe article is to identify the motives behind theuse of convertible bonds in the financial restructuring process of public companies listed on the Warsaw Stock Exchange. Empirical examination of 71 convertible sales conducted between 2009 and 2017 by 38 issuers leads to a number conclusions. First, only one fourth of convertibles in the Polish capital market are issued for restructuring purposes and they are usually sold to financial institutions and main creditors of the issuers through private offerings. Second, it seems that companies using convertibles in recovery process are big, highly leveraged, unprofitable and insolvent entities which treat hybrid debt as backdoor equity financing to reduce time and costs of selling common stock. Some firms also use relatively cheaper convertible bonds to restructure their liabilities by prematurely redeeming higher coupon corporate bonds and bank credits. Third, there has been a drop in the number of convertible issues carried out for restructuring purposes, which may be partly explained by the expansionary monetary policy carried out by the Polish central bank.
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