Bonds with warrants (OBSA — Obligations à Bons de Souscription d'Actions) are compound instruments combining a straight bond with detachable equity warrants, giving the holder the right to subscribe to new shares at a predetermined price during a specified period. Unlike convertible bonds, the bond and warrants are traded separately after issuance. Used in fundraising and structured finance, they offer investors downside protection (bond floor) combined with equity upside (warrant optionality). Their valuation requires separate pricing of the bond component (DCF at credit-adjusted rate) and the warrant component (options model — Black-Scholes or binomial).

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Example: a Swiss medtech company issues CHF 3.0 million of OBSAs at 4.0% coupon with warrants exercisable at CHF 150 per share for 3 years. The bond component is valued at CHF 2.6 million and the warrants at CHF 0.4 million. The warrant exercise represents a potential dilution of 8% of the current share capital — factored into the cap table modelling for the next financing round.

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Hectelion values OBSAs and their warrant components for accounting, tax and transaction purposes.