Floorless Preferred Stock/Debenture Message Board

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Strategies & Market Trends : Floorless Preferred Stock/Debenture

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To: John Liu who started this subject	7/11/2002 12:00:46 AM
From: semi_infinite	Read Replies (2) of 1438

Check out Lucent's convertible preferred with put option. Credit terms prevent cash payment so it probably means paying in stock (if stockholders approve) and dilution. From Goldman Sachs: "MAKING SENSE OF A PREFERRED PUT OPTION. Although the outsized 45%+ yield to the 8/2/04 put on Lucent’s 8% convertible preferreds may be alluring, investors must be mindful that valuing this put is difficult as it is not clear what recourse is available if the company is unable (or unwilling) to pay it. Complicating matters, restrictions in Lucent’s current credit facilities prohibit it from paying the put in cash. Moreover, with Lucent stock below about $2.75, the company may need shareholder approval to settle the put in stock (which itself could lead to such dilution as to make it impractical). We believe that not paying the put, although likely an investor-relations disaster across its capital structure, would not (at least technically) be an event of default."

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