Debt that can be converted from debt to equity. In Lieu of repayment of the debt, it is usually advantageous to the holder to convert to common stock if the value of the common stock on conversion exceeds the principal and interest owed on the convertible debt. Convertible debt is similar to convertible preferred stock, but is to be repaid prior to preferred or common stock in the event of a sale or liquidation, thereby providing more senior protection until converted.