US undermines convertibles

Author: | Published: 1 Dec 2008

Four months after the SEC instituted a ban on US short selling, the convertible bonds market has disappeared.

A consequence of a rule designed to prevent the "substantial threat of sudden and excessive fluctuations of securities prices," the lack of convertible bonds could have a drastic affect on the private equity market when credit begins to unfreeze.

"Convertible bonds were the best way to raise capital when the economy comes back," Latham & Watkins partner Witold Balaban said. "Next year, or whenever the economy turns around,...