TITLE

Zeros Reenter The Convert Fray

AUTHOR(S)
Santini, Laura
PUB. DATE
June 2003
SOURCE
Investment Dealers' Digest;6/23/2003, Vol. 69 Issue 25, p10
SOURCE TYPE
Trade Publication
DOC. TYPE
Article
ABSTRACT
Zero-coupon convertibles have joined the pack of convertible bond issues in the U.S., and not for energy companies, but for a healthcare and a technology company. Taking advantage of heavy demand from investors, Wall Street, New York City-based firms are trying to sell zero-coupon deals to issuers. And for those companies concerned about diluting their share price as a result of issuing convertibles, Wall Street is allowing them to use over-the-counter derivatives contracts to create a structure dubbed a call spread that essentially immunizes against the risk of dilution. Earlier this year, "there was a tremendous lack of supply in the convertibles market," said Sean Brady, head of equity-linked origination at Credit Suisse First Boston Corp., which has executed 10 such convertibles offerings in the past few months. Many companies that issued convertibles five years ago have experienced sharp declines in their share prices. The equity plunge has thrust these convertibles way out of the money, meaning investors won't be able to exchange bonds for equity shares until the stock price rebounds. Dilution causes some companies to hesitate. Many companies think their stock prices remain depressed and hesitate to offer convertibles at 15%-30% premiums.
ACCESSION #
10214291

 

Related Articles

  • Reverse Convertibles.  // Practical Accountant;Jun2008, Vol. 41 Issue 6, p12 

    The article focuses on the pros and cons of reverse convertibles consisting of a debt instrument and a put option in the U.S. The reverse convertibles might yield double-digit figures and offer some protection against declines in stock prices. Meanwhile, the investor can lose initial investment...

  • Calls of out-of-the-money convertible bonds. Cowan, Arnold R.; Nayar, Nandkumar; Singh, Ajai K. // FM: The Journal of the Financial Management Association;Winter1993, Vol. 22 Issue 4, p106 

    In this paper, authors examine calls of convertible bonds in which the effective call price of the bond exceeds the conversion value. Several studies report negative common stock price reactions to calls of convertible bonds. In contrast, authors study calls in which the conversion option is...

  • Grainger offers bonds-for-equity swap.  // Estates Gazette;11/1/2008, Issue 843, p40 

    The article reports that shares in listed residential property investor Grainger declined 43% after the company announced measures to reduce its debt position. According to an announcement by Grainger on October 24, 2008, it would give investors that had bought convertible bonds a cash payment...

  • Discussion of “Using accounting information for consumption planning and equity valuation”. Christensen, Peter // Review of Accounting Studies;Sep2007, Vol. 12 Issue 2/3, p257 

    This paper discusses Yee (), who investigates the role of accounting information for consumption planning and equity valuation. Higher earnings quality increases investor welfare and ex ante stock prices as well as the weight on earnings in valuation equations based on both cash flows and...

  • Options PROVIDE LEVERAGE, LOWER VOLATILITY.  // Financial Planning;Oct2006, Vol. 36 Issue 10, Special section p7 

    The article features investment options in equity portfolios. Options provide investors the ability to profit from moves in stock prices without risking as much capital as buying stocks. Options discussed include equity call, which allows the owner to join in the upward movement of a stock...

  • PROFIT FROM FLEXIBILITY. Anderson, James A.; Scott, Matthew S. // Black Enterprise;Sep2003, Vol. 34 Issue 2, p40 

    Encourages investors to invest in convertible bonds in the U.S. Information on convertible bonds; Stock market performance of convertible bonds; Market study conducted by Morningstar company.

  • Biotech holds steady in Q4. Mitchell, Peter // Nature Biotechnology;Feb2004, Vol. 22 Issue 2, p135 

    Reviews the share prices of the biotechnology industry in the fourth quarter of 2003. Impact of the rise of the valuation of shares on investors; Information on how the IPO markets faired; Summary of the biotechnology markets in Europe.

  • Signaling with Convertible Debt. Davidson III, Wallace N.; Glascock, John L.; Schwarz, Thomas V. // Journal of Financial & Quantitative Analysis;Sep95, Vol. 30 Issue 3, p425 

    We test whether the conversion price (ratio) is viewed by the stock market as a credible signal of the firm's future earnings prospects (Kim (1990)) and, subsequently, whether convertible debt serves as backdoor equity financing (Stein (1992)). Examining the conversion price in relation to...

  • Convert to the cause. Simons, Howard L. // Futures: News, Analysis & Strategies for Futures, Options & Deri;May2001, Vol. 30 Issue 6, p48 

    Presents an overview of the convertible bond market. Characteristics of convertibles; Convertible valuation and pricing; Convertible hedging and decision points; Relationship between the stock's dividend and the convertible bond's coupon; Creation of an interesting decision point referred to as...

Share

Read the Article

Courtesy of VIRGINIA BEACH PUBLIC LIBRARY AND SYSTEM

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics