Why do companies use convertible offerings?

Companies use convertible offerings primarily to secure lower interest rates and attract investors. Convertible securities, which are typically bonds or preferred shares that can be converted into a predetermined number of common shares, provide a unique advantage for issuers. When companies offer these types of securities, they are often able to offer lower coupon rates compared to traditional debt because investors are attracted to the potential upside of converting their debt into equity if the company's stock performs well. This potential for equity participation can make the investment more appealing, thus allowing the company to save on interest payments.

Additionally, convertible offerings can effectively broaden a company's investor base, drawing in not just those looking for fixed-income returns, but also equity investors who are seeking growth opportunities. This feature can lead to better terms and conditions for the issuer, ultimately lowering the overall cost of capital.

The other choices do not accurately reflect the primary motivations behind convertible offerings. For instance, raising debt financing exclusively overlooks the dual nature of convertibles; companies are indeed securing debt, but with the added option of equity, which is central to their attractiveness. Avoiding common stock issuance does not capture the strategic intent behind convertibles, which often may include an eventual equity raise under favorable conditions. Finally, while administrative costs and complexity can be a