The old convertible bond fallacy...

FT: "Issuers like them because the interest payments are lower than they are on conventional bonds, since they are subsidised by the value of the equity option. They can also be more advantageous than issuing straight equity, because if the company’s share price does not rise, then the bondholders are unlikely to convert the bonds into shares and the company will have, in effect, raised finance at a subsidised rate and avoided dilution to existing shareholders"

Better than debt and better than equity. Are there any free lunches?

It is an old fallacy. Convertibles are better than debt when things go badly and bonds are not converted (a company got debt with a cheap coupon) and better than equity when things go well and bonds get converted (the company ended up issuing equity at much lower cost and avoiding the usual negative reaction from the market).

It is the same as insuring half of a house with the argument that it is better than no insurance if it catches fire, and better than full insurance if nothing happens.

Clearly, if shareholders know that things will go well, they'd rather issue debt instead of convertibles and keep the upside for themselves. If they know that things will go badly, they'd rather issue equity instead of convertibles and share the pain.