A convertible bond or preferred stock issue whose issuer cannot convert it by force either because it is selling below parity or because the issue is call-protected during a lockout period or until a specific price level is reached. If the holders don’t wish to convert their convertibles into the issuing company’s equity, the conversion process is said to be “frozen”. In this case, the bond is more valuable as a debt security than it is worth converted into equity. Usually, frozen convertibles remain outstanding for several years and cannot be forced to convert because their conversion values are below their call prices. This occurs when the market price of common stock decreases rather than increasing. As a result, the convertible security remains in its original form (as debt).

A frozen convertible is also known as a hung convertible.