Understanding OBSAs (bonds with warrants)

Bonds with share warrants (OBSAs) are special convertible bonds issued and sold by a company, giving holders the right to subscribe for ordinary shares in that company at a predetermined conversion rate. Once converted, OBSAs are treated and traded like ordinary shares, and are accounted for as additional shares in the issuing company.

OBSAs are a useful tool for companies seeking to raise capital, as they offer investors a higher rate of return than treasury bills, zero-coupon bonds or low-interest securities. They also enable companies to avoid high issuance costs, as bonds represent a cheaper source of financing than shares. OBSAs are a useful form of financing, enabling companies to raise additional funds at a lower interest rate.

In addition, OBSAs have the potential to provide benefits to both companies and investors. For companies, they can benefit from short-term financing at a relatively low cost. Investors can benefit from higher yields than normal bonds, and can also enjoy greater liquidity and investment opportunities, as OBSAs are often traded in the same way as ordinary shares.