What is a major advantage of convertible securities for issuers?

Convertible securities offer issuers a major advantage through the ability to provide lower coupon payments compared to traditional debt instruments. When a company issues convertible securities, it typically does so at a lower interest rate because these securities come with the added option for investors to convert them into shares of the company's stock in the future. This potential for conversion adds value for investors, making them willing to accept a lower coupon rate than they would for non-convertible debt.

Moreover, the lower coupon payments reduce the company's immediate cash outflow obligations, enhancing its liquidity position. This can be particularly beneficial for companies that may be looking to invest their cash in growth opportunities rather than making hefty interest payments. Overall, the issuance of convertible securities aligns with a strategic way for companies to manage their capital structure while still attracting investment.