Under what condition might a company decide to issue convertible debt?

A company may choose to issue convertible debt primarily to raise capital while potentially minimizing equity dilution. This financing method allows a company to obtain necessary funds through debt that can later be converted into equity at the discretion of the bondholder.

By issuing convertible debt, a company can attract investors who are interested in the potential upside of converting the debt into equity, which might be appealing if the company's stock performs well in the future. This strategy enables the company to avoid a large immediate dilution of current shareholders’ equity, as the conversion only occurs at a later date when the bonds are converted into shares by the holders.

This option provides a way to raise funds without immediately issuing more equity, which can help maintain existing shareholders’ control and value. Hence, it represents a strategic balance between accessing immediate capital and managing the potential impact on current shareholders in the future.