There are a number of reasons why the investors and/or the company would prefer going for convertible debt.
Dec 05 2013 07:01 PM
For the company, the reasons are clearer. If the company believes its equity will be worth more at a later date, then it will dilute less by issuing debt and converting it later. Also the transaction costs, mostly legal fees, are usually less when issuing debt vs equity.
For investors, debt is senior to equity in a liquidation so there is some additional security in taking a debt position in a company vs an equity position.