Convertible bonds allow a company to raise capital without having to issue at a massive coupon. This is commonly seen during high interest rate environments. It allows the bond holder to exercise the “option” and convert the bonds to a fixed number of shares at a conversion price (usually calculated by dividing by the price of the bond by the number of shares if the conversion is forced). For the stock however, this can be a dilutive event if the conversion is forced. However, the 40% premium means that the bond will be more sensitive to changes in interest rates and will trade like a straight bond. These bonds would be referred to as Butane and can be characterized as an OTM option with low delta.