What does the term 'quasi equity' refer to in finance?

The term 'quasi equity' in finance refers to an instrument resembling debt but treated as equity because it often possesses characteristics of both debt and equity. Quasi equity instruments may include things like convertible bonds or preferred shares that can be converted into common equity under certain conditions. These instruments typically provide some degree of ownership or equity-like treatment in terms of accounting and regulatory purposes while still having debt characteristics, such as a fixed return or interest payments.

This treatment is important because it allows companies to access funding while potentially improving their balance sheets, making it attractive to both investors and companies in need of capital. It provides the flexibility of debt financing, with the upsides associated with equity, thereby easing the complexities of traditional financing structures.