AFIC Notes (ASX code: AFIG) are convertible notes issued in December 2011 and which are now just under one month away from the maturity date of 28 February, 2017. Unlike ordinary debt instruments, holders of convertible notes are faced with the necessity of making a decision prior to the maturity date.
A convertible note can be thought of as a corporate bond with an attached equity call option. The bond component has a face value of $100 and pays fixed-rate interest at a rate of 6.25%, payable semi-annually. The call option gives the holder the right but not the obligation to exchange the face value of the bond for 19.6603 ordinary shares in the issuer. At the current share price, 19.6603 AFI shares are worth around $116.80. AFI shares are listed on the ASX and so its ordinary shares will fluctuate in value, as will the value of the AFIC Notes.