From Wikipedia, the free encyclopedia
Strip financing is the repackaging of different types of obligations—debt, preferred stock, common stock etc.—into one security. The idea is to ease conflicts of interest between the holders of the initial components, bond- and stockholders. Also, repackaging can raise a securities' liquidity. One popular form developed in Canada was the Income Trust, which combined income from a high yield bond with a stock dividend. Beginning in 2003 this concept was expanded to the U.S. when "Income Deposit Securities" (also known as Enhanced Income Securities) were first offered on the American Stock Exchange (AMEX). These consist of a high yield bond and a class of common stock committed to pay a high dividend from free cash flows combined as a single unit.
