What do warrants represent in a debt deal?

Warrants represent a form of a security that provides the holder with the right to purchase a company's stock at a predetermined price, typically within a specified timeframe. In the context of a debt deal, they are often issued as an incentive to make the debt offering more attractive to potential investors. By including warrants, the issuer can sweeten the deal, enhancing its appeal and potentially allowing it to secure better financing terms or attract more investors. This added value comes from the opportunity for investors to benefit from equity appreciation without immediate equity dilution, thereby distinguishing warrants from other debt features.