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Technology Stocks : IRID - Iridium World Communications IPO Announced! -- Ignore unavailable to you. Want to Upgrade?

To: FESHBACH_DISCIPLE who wrote (2514)	12/7/1999 1:52:00 AM
From: FESHBACH_DISCIPLE	Read Replies (1) \| Respond to of 2693

Using Bonds to Buy Stock When a company is about to emerge from bankruptcy, there may be a chance to get new stock at a bargain price by buying the old bonds (or other securities) that will be converted into new stock under the plan of reorganization. For example, when Western Company of North America (an oil drilling company) was about to emerge out of Chapter 11 in early 1989, its plan of reorganization called for its old bonds, preferred stock and common stock to be exchanged for new common stock at varying exchange ratios. Given the exchange ratios and prices of the Western securities just before the reorganization took effect, you would have paid about $5.50 per share of new common if you bought the old bonds or preferred stock, but you would have paid over $19.00 per new share if you bought the old common stock. (This is another example of how over-priced a bankruptcy stock can be.) When the Western reorganization took effect, the new common stock began trading at 6 1/4, and it rose as high as 18 over the next year.