5. In the “post-Internet bubble crash,” the reset feature of such securities has been criticized and often referred to as “death spiral” or “toxic.” However, at the time of issuance issuers often either did not realize the extreme dilutive impact of this feature, specifically the continuing pressure on the stock price due to shorting by the investors to hedge their exposure to the stock, or did not consider it material, given their then expectations of stock price growth. Such toxic converts have fallen out of favor.

6. For the balance of this chapter, unless otherwise noted, we will use the term convertible for exchangeables as well. As may be expected, exchangeables are used to monetize stakes that an entity, be it a firm or an individual, owns in the shares of another publicly traded common stock.

7. Equity credit from rating agencies is outside the scope of this chapter. Suffice it to say that rating agencies have repeatedly indicated that with the exception of common shares, which (by definition) are accorded 100% equity credit, they do not adhere to a formulaic approach to assigning ratings for securities or corporate issuers. Nonetheless, one of the rating agencies has indicated the general range of equity credit that may be expected for a list of financial instruments. See Libby Bruch, “Integration of Rating Scales and Re-evaluation of Equity Credit,” Standard & Poor’s CreditWeek, February 24, 1999, pp. 9–11.