Hybrid Financing Instruments

‡ Preference Share capital. ‡ Convertible debenture/bonds. ‡ Warrants. ‡ Options.

Preference Share Capital Preference share capital is a unique type of long -term financing in that it combines some of the features of equity as well as debenture. ‡ It carries fixed rare of dividend. ‡ It ranks higher than equity as claimant to the income. . As a hybrid source of financing it is similar to debenture insofar.

It also partakes some of the attributes of Equity Capital namely: ‡ Dividend paid after tax profit i.‡ It normally does not have any voting rights ‡ It does not have share in residual earnings. ‡ Irredeemable preference shares have no fixed maturity date .e. it is not tax deductable ‡ Preference dividend payment depends on the discretion of management. .

Features of Preference Shares: ‡ Prior claim on income ‡ Cumulative dividend ‡ Redeem ability ‡ Fixed Dividend .

‡ Convertibility ‡ Voting Rights ‡ Participation Features ‡ Evaluation .

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