Harken Energy Corporation (HEC) Message Board

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Gold/Mining/Energy : Harken Energy Corporation (HEC)

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To: Thomas M. who wrote (3075)	7/1/1998 8:11:00 AM
From: Zeev Hed	Read Replies (1) of 5504

In most other floorless, the company always has the right at any time to pay cash rather than stock. The problem is typically that a company needing to resort to floorless financing does it because its back is to the wall (or its CFO is simply stupid, which I doubt is the case here). The European debenture, for instance is at a fixed conversion rate ($6.5/share, if memory serve), at that time this mode of financing was still available, but with this debt on the book the leverage of the company probably became too big for normal financing sources to take the risk. When a company has its back to the wall, it does not have $50 MM on hand to redeem the debt and thus the likelihood of buying back the debenture is small. AIPN even had an anti arbitrage clause, and the holders of the floorless somehow managed to get the price to 1/3 of what it was when the debenture was issued. At the time I thought that may give the common holders some protection from a death spiral situation, but here, the debenture holders are specifically encouraged to engage in shorting and such is specifically allowed in the debenture documents. Zeev

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