A convertible bond on which the stock into which the bond is convertible has fallen so far below the conversion price that the convertible bond trades in the market as regular debt. For example, if a convertible bond is convertible into stock at a price of $40 per share when the stock sells at only $7 per share, the conversion feature has such little value that the bond will be priced to offer investors a yield nearly equal to that from a bond with similar risk and maturity but without a conversion feature.
