Reading 19 Blue box example 1

CFA Level III Fixed Income
#1

WRT subject "the contingent convertible long-term bonds are issued by the savings bank and sold to institutional investors. The key feature is that if defaults on the mortgage loans reach a certain level or the savings bank’s capital ratio drops below a certain level, as determined by the regulator, the bonds convert to equity at a specified price per share. "

the timing is uncertain but the amount ( specified price per share) is certain then why it is type IV liability?

thank you

#2

The amount is uncertain because you do not know whether at the next coupon payment date (let’s say), will there be a coupon payment or a conversion of the bond into equity (if the capital ratio drops below the threshold).