Zero-Coupon Convertible

A zero-coupon bond issued by a corporation that can be converted into that corporation's common stock. Also known as a "split coupon bond".

Investopedia Says:
Because their price will appreciate with an increase in the stock price of the issuing company, zero-coupon convertibles tend to offer lower yields than regular zero-coupon bonds. The lower yield deters some investors from choosing this type of bond, but, if a potential increase in stock price offers greater capital gains than the accrued interest from the bond, the zero-coupon convertible allows the investor to choose to receive the capital gain.

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Find out about the nuts and bolts, pros and cons of investing in bonds. Convertible Bonds: An Introduction
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Debt instrument that begins as a zero-coupon bond and converts to an interest-paying bond at a specified date in the future. These bonds, issued by corporations and municipalities, are advantageous to issuers because they do not have to pay out cash interest for several years. They are attractive to investors, particularly in tax-sheltered accounts like IRAs and Keoghs, because they have locked in a reinvestment rate for several years, and then can receive cash interest. For example, a 55-year-old investor may want a split coupon bond because it will appreciate in value for 10 years, and then pay interest when he is retired and needs regular income. Also known as Zero-Coupon Convertible Security.