We continue our convertible debt series today with a discussion about conversion mechanics. This is a very important term, but usually one that everyone can be happy with at the end if they concentrate on it.
In general, debt holders have traditionally enjoyed superior control rights over companies with the ability to force nasty things like bankruptcy and involuntary liquidations. Therefore, having outstanding debt (that doesn’t convert) can be a bad thing if an entrepreneur ever gets “sideways” with one of the debt holders. While it’s not talked about that much, it happens often and we’ve seen it many times leaving the debt holder in a great position of leverage in negotiations.
To read the full, original article click on this link: Convertible Debt – Conversion Mechanics | Ask the VC
