BBY -Best Buy Message Board

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Non-Tech : BBY -Best Buy

BBY 79.04

+0.5%

Nov 7 9:30 AM EST

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To: Charles Holewinski who wrote (143)	2/9/1997 12:41:00 PM
From: DanZ	of 980

Charles, You might check to make sure that the BBY preferred is cumulative. With cumulative preferred stock, preferred dividends in arrears must be paid before dividends on the common stock can be paid. While rare, this type of stock does exist in the market place and BBY is probably on the brink of suspending their preferred dividend payments. If they did this, the preferred issue would probably go much lower because of the time value of money. Dividends that won't be paid for another year or two are worth less today than dividends paid today and this would cause the preferred stock to drop immediately. You might also check to see if the convertible preferred is callable. I don't know if BBY has the cash to do it, but this would save them a lot of money and probably reduce their weighted average cost of capital. I imagine that 14% is at the high end of what they are paying for money. Calling the preferred stock would probably have a positive effect on the common stock and you would receive a premium over the current price of the preferred. You might also check to see what the call premium is.

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