Companies offer executives interest-paying bonds convertible into stock at a very attractive conversion price.
We set up a small team to meet with his folks and two weeks later we had an agreement to sell him convertible preferred stock at 9.25%.
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It got convertible preferred stock in the combined company and took two of seven board seats, 32.7% of voting rights, and an option to convert its holdings into 32.7% of Solo Cup common.
Teco's new 9.5% preferred is mandatorily convertible into common stock on Jan. 15, 2005.
Earlier this year, there were 3.25 million shares outstanding and 1.4 million preferred shares convertible into common stock on a one-for-one basis.
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Glenview Capital, a New York hedge fund, amassed a 7% stake in stock and convertible bonds.
The way most deals are arranged, investors get stock or convertible debt at a fixed price that is lower than the market price.
As such, they can trade much like a stock as it reflects the performance of the stock they are convertible into.
Because people wrongly view preferreds as less safe than bonds, the preferreds tend to have better yields and lower conversion premiums. (The conversion premium is the amount by which the price of a convertible exceeds the value of the common stock you would get if you converted.) Another plus: They are exchange traded, so preferreds are more liquid.
Then, in 2006, as it tried to mount a turnaround, Ford began a series of efforts to raise capital, including convertible debt offers and the issuance of new stock and warrants.
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Merrill used Stevenson's stock pledge to issue a type of convertible security it calls Strypes, which other firms market with acronyms such as Decs and Traces.
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In these deals, Ribotsky invested cash in thinly traded public companies, in return for securities convertible into discounted common shares, often causing the stock price to tumble.
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Most convertible securities allow the buyer to convert into common stock at a fixed conversion price set at a modest premium to wherever the common is trading at the time the convertible security is issued.
In the late 1960s dealmaker Jimmy Ling made a fast (and fleeting) fortune buying up the stock of companies and paying for it with convertible debentures of his conglomerate, LTV.
One thing depressing the stock: the market's awareness that the convertible presented a potential for unlimited dilution of existing shares.
The loans were to be convertible at a price about half of that at which the stock is now selling.
The deal will be settled by a combination of new shares and convertible bonds, said the company in a filing to Hong Kong Stock Exchange.
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For instance, Intel just recently issued non-convertible debt for the first time in nearly 25 years in order to repurchase stock and take advantage of the opportunity to capture value for shareholders.
As a convertible investor you have the comfort of knowing that even if you don't pick the right stock, the overall results can still be positive.
Remember: A convertible's price is based on its yield as a debt instrument as well as on its value as a stock in waiting.
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