What is a hybrid security?

hybrid security is one that combines elements of two main types of security: own capital and debt. The most famous examples include convertible binding and preferential share. Hybrid security for design combines the benefits of capital and debt securities. Some argue that this is a form of compromise and therefore also includes disadvantages of both types. Debt security is set up so that it is eventually returned to the issuer in return for cash. The most common debt security is a bond. The security of its own capital gives the holder of partial ownership in society, but usually does not return to the issuer for cash. The most common security of its own capital is the company in the company. This could mean, for example, that the holder of his own part of the issuing society, but still may be safe later. This probably makes security desirable.

One examples of hybrid security Je convertible binding. In principle, it is a traditional bond, which means that the company issues it to the buyer and promises to repay the purchase price plus interest, who holds the bond on the specified date. Unlike the traditional bond, the convertible bond allows the holder to be exchanged at any time for the company's shares at agreed prices. If you do so, this will mean that the holder will not receive cash payment for the originally planned expiration date of the bond. The convertible bond is particularly desirable because it combines the guarantee of future payments if the issuing company remains in the business, with the possibility of use, if the company's stock price seems to be increased.

Another type of hybrid safety is preferential share. This is the form of Stock, in which the value will be paid if the company is liquidated, with this payment made in full before the administrators begin to divide the remaining assets, among other shareholders and creditors. In most cases it will be guaranteed that PThe reference share will have any dividend payouts before those issued for ordinary shares. This means that the preferential share is legally classified as security of its own capital, which gives partial ownership of the company, but retains the possibility of obtaining the nominal value back in cash as with debt security.