What do you mean by foreign currency convertible bonds (FCCBs)? State the benefits of FCCBs to investors and the issuer.

The Foreign Currency Convertible Bonds (FCCBs) are unsecured, carry a fixed rate of interest and an option for conversion into a fixed number of equity shares of the issuer company. Interest and redemption price (if conversion option is not exercised) is payable in dollars. FCCBs shall be denominated in any freely convertible Foreign Currency. However, it must be kept in mind that FCCB issue proceeds need to conform to ECB end use requirements. Benefits to the Issuer Company Being Hybrid instrument, the coupon rate on FCCB is particularly lower than pure debt instrument thereby reducing the debt financing cost. FCCBs are book value accretive on conversion. It saves risks of immediate equity dilution as in the case of public shares. Unlike debt, FCCB does not require any rating nor any covenant like securities, cover etc. Benefits to Investors It has advantage of both equity and debt. It gives the investor much of the upside of investment in equity, and the debt portion protects the downside. Assured return on bond in the form of fixed coupon rate payments. Ability to take advantage of price appreciation in the stock by means of warrants attached to the bonds, which are activated when price of a stock reaches a certain point.