This paper provides an explanation of callable convertible issue from the viewpoint of managerial entrenchment. Zweibel [American Economic Review 86 (1996)] has shown that an entrenched manager voluntarily issues straight debt in order to avoid hostile takeover. Straight debt, however, may lead the firm into bankruptcy in which a manager loses her position. We show that an entrenched manager can avoid a hostile takeover and bankruptcy at the same time by issuing well-designed callable convertible debt. Although callable convertible debt may decrease the value of the firm, an entrenched manager will prefer it over straight debt.