A hybrid security that automatically (mandatorily) converts to common equity (common stock) of an issuer on a pre-specified date. Mandatory convertibles are equity-linked hybrid securities that changes it nature from a debt security into an equity security on a certain future date as defined by the issuer.
The main examples of such convertibles include PERCS (preferred equity redemption cumulative stock), DECS (debt exchangeable for common stock), DECS (dividend enhanced convertible securities), TAPS (threshold appreciation price securities), PEPS (premium equity participating security), PIES (premium income equity securities), PRIDES (preferred redemption increased dividend equity securities), among others.
Mandatory convertibles started to appear in the market in 1988.
