A company issues convertible bonds with a 'make-whole' fundamental change provision. If the company is acquired at a premium, what does this provision typically require?

Why C — The conversion rate is increased (temporarily reducing the effective conversion price) to compensate bondholders for the lost time value of the conversion option

A make-whole fundamental change provision increases the conversion rate when a qualifying change of control occurs, effectively reducing the conversion price and providing additional shares to the bondholder upon conversion. This compensates bondholders for losing the time value of their conversion option, which would normally benefit from the stock's continued potential appreciation. The amount of the increase is typically set forth in a table in the indenture and varies based on the stock price at the time of the fundamental change and the time remaining until maturity. This provision is standard in most convertible bond offerings.