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Strategies & Market Trends : Value Investing

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To: Wallace Rivers who wrote (17515)	8/5/2003 12:31:25 PM
From: Brinks	Read Replies (1) of 78751

"According to those posts, the conversion price slides down were certain price targets not to be met. I don't like deals like this, to me it hints that the company is finding it difficult to obtain "conventional" financing." I was just studying the May 27, 2003 proxy for Wellman. Although this is not a "floorless" preferred financing the floor on the preferred is $ 6.75 versus initial conversion price of $ 11.25 (40% difference). This represents a deep discount. This preferred has a lot of teeth and hair (Preferred has accretion factor meaning dividends not paid in cash are added to liquidation and conversion preference). On pro forma basis book value would have been diluted from $ 13.39 to $ 12.75 had the preferred been converted on 12/31/02. One wonders about the timing of such a financing. Hats off to Warburg Pincus who could own 48.9 % of the company at the end of five years for approximately $ 125 million investment.

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