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Strategies & Market Trends : Floorless Preferred Stock/Debenture -- Ignore unavailable to you. Want to Upgrade?

To: Allen Furlan who wrote (1410)	7/13/2002 4:42:52 PM
From: Harpo	Read Replies (1) \| Respond to of 1438

I think that you have indirectly answered your own question. <<<Eventually a floorless convertible death spiral has to end, but how?>>> I think "death" is the key word here. <<<The corporation should not cease to be viable if it is a profitable enterprise.>>> "If" is the big word in this sentence. This type of financing is usually unnessary if a company is profitable, it's more of a last resort when all else has failed. So all you are really talking about here are remaining assets when debtholders carve up the carcass. Most of the "death spirals" I have followed were such dubious enterprises to begin with, or failed so completely, that there was little left for anyone. Not to say that there is no opportunity in the deeply discounted debt in some failed companies, but that is out of my league. regards, H

To: Allen Furlan who wrote (1410)	12/13/2002 5:57:02 PM
From: Crossy	Respond to of 1438

Allen, you raised an interesting point in message 1410: "Market will punish these bonds and preferreds because of fear. Would such investments be sound speculations during the death spiral?" That is a terrific reasoning. And in fact, if the floorless was a preferred STOCK - and not a bond ! - then the bonds usually should have a preferred claim over the floorless holders. Of course Bankruptcy is a tricky legal field. May I ask you did you succesfully play such a situation ? I would love to collect some notes on strategies such as the one you suggested.. (I didn't even check whether AES pref c are floorless.. or whether AES got a floorless out)' best rgrds CROSSY