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To: cfimx who wrote (209538)12/13/2002 5:29:14 PM
From: mishedlo  Read Replies (2) of 436258
 
When these companies issued the converts, they thought their stocks would be going to da moon. So they could then convert this debt into equity and be rid of the interest payments. The problem now is that the stocks are down with no chance to convert the debt. These folks are now stuck paying the interest, and soon the principal, which is the big problem. Some of the bonds will be coming due soon and the companies never expected they would have to deal with how to pay the principal on these things.

Please forgive my ignorance but I still do not understand

Letts try an example

MU sold tons of convertable bonds set at price of $45 or so a few years back.= if I am not mistaken

What precicely does that mean to MU, when and why.
That convertable gave the buyer the right(obligation if MU above strike price?) to buy MU at $45 or whatever. So what. No idiot would buy MU at $45. What am I missing here. Apologies cause I think it is obvious but I do not see it.

I really do not understan convertables at all.

M
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