Frankfurt. High interest rates make financing expensive – and convertible bonds increasingly attractive for companies. The semiconductor supplier Aixtron earned 450 million euros from the special interest-bearing securities. The Deutsche Börse even 600 million euros. And the demand for Vonovia's convertible bonds was recently so great that Germany's largest landlord increased the issued volume from the targeted 750 million euros to 850 million euros.
Convertible bonds are debt securities that investors have the right to convert into shares if the price exceeds a certain threshold. The complex financing instrument is part of the standard repertoire for many listed US companies, and it is also common in Asia.
In Europe, convertible bonds are still a niche - but one that is becoming increasingly popular in the finance departments of German corporations. And now a risky trend from the US market could also find its way here.
Worldwide, the volume of newly issued convertible bonds is heading for a record: At almost $203 billion from 278 deals, the volume of interest-bearing securities is above the previous high of 2021, according to the US investment bank Jefferies. At that time, the issuance volume of convertible bonds was around 187 billion euros.
The market is also active in Germany: Alexander Schlee, partner and capital market law expert at Linklaters, is observing a “boom in convertible bonds”. In the first half of the year alone, twice as many convertible bonds were issued in Germany as in the entire year of 2025. And there is no sign of an end to the trend. “The pipeline is very well filled.”
Karsten Wöckener, Head of Germany and capital market law expert at White & Case, confirms: “Convertible bonds are currently experiencing a renaissance.” This was demonstrated not least by the recent transactions by Aixtron and Deutsche Börse, which issued such securities for the very first time.
The most important reason for the emissions boom – globally as well as in Germany – is the changed interest rate environment. Dominik Gansloser, head of structured equity solutions at Jefferies in Germany, explains: “In the current environment with longer, higher interest rates, more and more companies are weighing up how they finance themselves.”
Convertible bonds can save interest costs
The yield on the ten-year federal bond is currently just under 3.4 percent. Just twelve months ago it was 2.6 percent. The interest rate burden on companies is based on the yield on the federal bond – plus a company-specific risk premium.
This means that the issue of classic bonds is now associated with significant interest expenses. “With convertible bonds, however, you can save significant interest costs,” says Gansloser.
The savings come from the conversion right. Companies regularly issue convertible bonds with an interest coupon of less than one percent. Companies usually pay back a little more than the outstanding nominal volume at the end of the term, so that the interest payment is actually only due at the end of the term.
Interest and repayment of the nominal value are eliminated entirely if the share price rises above the conversion option threshold and the investors convert their securities into shares. This value is usually between 30 and 40 percent above the share price when the bond was issued.
Linklaters expert Schlee therefore also emphasizes: “Convertible bonds are a good way for companies to reduce their debt burden.” Therefore, many real estate companies are among the issuers, but also technology companies such as chip manufacturers.
The emissions boom is further reinforced by the high demand from investors. Patrick Kindler, who also works in structured equity solutions at Jefferies, explains: In 2025 and 2026, market indices for convertible bonds developed very positively. This attracts more investors. “Overall, there is significantly more capital available than there are investment opportunities,” observes Kindler. “As a result, new issues are often several times oversubscribed.”
His colleague Gansloser from Jefferies confirms: “These are golden times for convertible bond investors.” The interest-bearing securities offer investors the prospect of a small interest rate and at the same time can benefit from the upside potential of a share. “The further the share price rises above the conversion price, the more the convertible bond usually follows the share price development,” explains the investment banker.
At the same time, however, the risk of loss is limited compared to shares, explains Linklaters expert Schlee. “The instrument offers downside protection as the issuer repays investors the capital invested on the final maturity date if the price remains below the conversion price.”
Convertible bonds therefore offer investors “the best of both worlds,” adds Kindler: the upside potential of a stock and the protection of a bond.
However, there are legal limits to the issue of convertible bonds, explains capital market lawyer Schlee. “They are a form of capital increase.” The so-called conditional capital is determined every year at the general meeting. This is the scope that companies have for capital increases without having to call a general meeting. The conditional capital is typically limited to ten percent of the company's share capital, Schlee continues.
Small shareholders are left out
Therefore, the issuance boom for convertible bonds is not entirely well received by the shareholders of the companies that use the instrument. The securities are usually issued with the exclusion of subscription rights. This means that existing shareholders cannot subscribe to the shares. In any case, the instruments with a minimum investment amount of typically 100,000 euros are aimed exclusively at institutional investors.
Jefferies banker Kindler confirms: “When companies issue convertible bonds, this often leads to discussions with shareholders.” The reason: “If companies exclude the subscription rights of existing shareholders when issuing, their shares can be diluted when the bonds are later converted into new shares.”
Nevertheless, from the Jefferies bankers' point of view, the advantages outweigh the disadvantages: if the bonds are converted, the company's share price will increase by at least 30, depending on the threshold. Shareholders hold a slightly smaller stake in the company due to dilution. But the increased price would more than compensate for them.
From Gansloser's point of view, another advantage of convertible bonds is that companies are flexible in how they use the funds raised: "You can invest in operational business, finance acquisitions or refinance existing liabilities." This promises further growth and rising prices.
In the USA, it is also common practice for a large part of the proceeds to be earmarked for a share buyback when the convertible bond is placed, reports Gansloser. In effect, the share price is supported in the short term with borrowed money and financed in the future by issuing new shares.
Gansloser emphasizes: “This is rare in Europe; issuers here tend to use parts of the proceeds to buy back their own shares over the term of the bond.” But a high-ranking banker at another US investment bank confirms that interest in this risky and unorthodox financing of share buybacks is also growing in the finance departments of German corporations.
