http://stockmarketbeat.com/blog1/2006/05/16/contingent-convertible-notes-crdn-case-study/ Our beat: The stock market. Our job: Beat it. Thu, 21 Aug 2008 23:02:50 +0000 http://wordpress.org/?v=2.2.1 http://stockmarketbeat.com/blog1/2006/05/16/contingent-convertible-notes-crdn-case-study/#comment-20056 Sensitivity Analysis - Financial Education - Everything You Need To Know About Finance Thu, 15 Mar 2007 19:05:47 +0000 http://stockmarketbeat.com/blog1/2006/05/16/contingent-convertible-notes-crdn-case-study/#comment-20056 [...] On the other hand, the bull case is also possible. For example, Newsday recently reported that the Army is seeking a replacement design for the current body armor vest. Ceradyne could potentially win this design, although the upside to such a win is uncertain given that Ceradyne already makes the armor plating that is inserted into the current generation vest. Finally, in Q12006, operating income more or less equaled net income. This is because the interest earned on cash was enough to offset interest paid on the company’s convertible bonds. So, after applying the 36.5 per cent tax rate we should be at a rough estimate of net income for each case. So let’s see them: So now we have a set of three potential outcomes for Ceradyne in 2007. You can assign your own weight to each potential outcome, or play with the scenarios. But at least it should now be apparent that the $3.54 consensus estimate for 2007, and even the $3.15 to $4.27 range, are subject to a good deal of uncertainty. See also: [...] […] On the other hand, the bull case is also possible. For example, Newsday recently reported that the Army is seeking a replacement design for the current body armor vest. Ceradyne could potentially win this design, although the upside to such a win is uncertain given that Ceradyne already makes the armor plating that is inserted into the current generation vest. Finally, in Q12006, operating income more or less equaled net income. This is because the interest earned on cash was enough to offset interest paid on the company’s convertible bonds. So, after applying the 36.5 per cent tax rate we should be at a rough estimate of net income for each case. So let’s see them: So now we have a set of three potential outcomes for Ceradyne in 2007. You can assign your own weight to each potential outcome, or play with the scenarios. But at least it should now be apparent that the $3.54 consensus estimate for 2007, and even the $3.15 to $4.27 range, are subject to a good deal of uncertainty. See also: […]

]]> http://stockmarketbeat.com/blog1/2006/05/16/contingent-convertible-notes-crdn-case-study/#comment-16690 XLNX: Xilinx Joins the Dumb Financing Decision Parade - Stock Market Beat - Our beat is the stock market. Our job is to beat it. Wed, 28 Feb 2007 22:54:31 +0000 http://stockmarketbeat.com/blog1/2006/05/16/contingent-convertible-notes-crdn-case-study/#comment-16690 [...] For some reason, the latest fashion appears to be issuing convertible notes. The practice allows companies to reduce the apparent share count, but assuming the share price rises (which stockholders are presumably rooting for) the shares willl just come right back. We’ve seen this with Ceradyne (CRDN) and Finisar (FNSR), and now Xilinx prices $900 mln 3.125 pct convertible debentures | Reuters.com: Xilinx Inc. (XLNX) said it priced $900 million of 3.125 percent convertible junior subordinated debentures due in 2037, and expects the sale to close March 5.The debentures will initially be convertible into shares of Xilinx’s common stock at a conversion rate of 32.0760 shares of common stock per $1,000 principal amount of debentures, the company said. At recent share prices, the company should be able to buy back between 32 and 33 million shares with the proceeds. If the company does well and the shares rise above $31.18 before 2037, the company will then exchange the bonds for approximately 29 million shares. So, for a net reduction of 3-4 million shares the company will be paying a 1.725% premium (the convertible yield less the dividend yield on the stock) for 30 years. [...] […] For some reason, the latest fashion appears to be issuing convertible notes. The practice allows companies to reduce the apparent share count, but assuming the share price rises (which stockholders are presumably rooting for) the shares willl just come right back. We’ve seen this with Ceradyne (CRDN) and Finisar (FNSR), and now Xilinx prices $900 mln 3.125 pct convertible debentures | Reuters.com: Xilinx Inc. (XLNX) said it priced $900 million of 3.125 percent convertible junior subordinated debentures due in 2037, and expects the sale to close March 5.The debentures will initially be convertible into shares of Xilinx’s common stock at a conversion rate of 32.0760 shares of common stock per $1,000 principal amount of debentures, the company said. At recent share prices, the company should be able to buy back between 32 and 33 million shares with the proceeds. If the company does well and the shares rise above $31.18 before 2037, the company will then exchange the bonds for approximately 29 million shares. So, for a net reduction of 3-4 million shares the company will be paying a 1.725% premium (the convertible yield less the dividend yield on the stock) for 30 years. […]

]]> http://stockmarketbeat.com/blog1/2006/05/16/contingent-convertible-notes-crdn-case-study/#comment-13540 Valuing Hybrid Securities - Financial Education - Everything You Need To Know About Finance Thu, 08 Feb 2007 16:00:36 +0000 http://stockmarketbeat.com/blog1/2006/05/16/contingent-convertible-notes-crdn-case-study/#comment-13540 [...] Finisar’s (FNSR) announcement that it was exchanging some of its convertible notes for contingent convertible notes generated some interest in our case study on contingent converts. Given the interest, we figured we would reward it with a study of the specific Finisar transaction. We’ll start with the company’s spin: Overall, the exchange provides the Company with more flexibility to utilize its cash flow from operations between now and 2010, while also minimizing dilution to shareholders. [...] […] Finisar’s (FNSR) announcement that it was exchanging some of its convertible notes for contingent convertible notes generated some interest in our case study on contingent converts. Given the interest, we figured we would reward it with a study of the specific Finisar transaction. We’ll start with the company’s spin: Overall, the exchange provides the Company with more flexibility to utilize its cash flow from operations between now and 2010, while also minimizing dilution to shareholders. […]

]]> http://stockmarketbeat.com/blog1/2006/05/16/contingent-convertible-notes-crdn-case-study/#comment-4105 Stock Market Beat » Blog Archive » What Finisar’s Note Exchange Means to Shareholders Mon, 09 Oct 2006 20:23:51 +0000 http://stockmarketbeat.com/blog1/2006/05/16/contingent-convertible-notes-crdn-case-study/#comment-4105 [...] Finisar’s (FNSR) announcement that it was exchanging some of its convertible notes for contingent convertible notes generated some interest in our case study on contingent converts. Given the interest, we figured we would reward it with a study of the specific Finisar transaction. We’ll start with the company’s spin: Overall, the exchange provides the Company with more flexibility to utilize its cash flow from operations between now and 2010, while also minimizing dilution to shareholders. [...] […] Finisar’s (FNSR) announcement that it was exchanging some of its convertible notes for contingent convertible notes generated some interest in our case study on contingent converts. Given the interest, we figured we would reward it with a study of the specific Finisar transaction. We’ll start with the company’s spin: Overall, the exchange provides the Company with more flexibility to utilize its cash flow from operations between now and 2010, while also minimizing dilution to shareholders. […]

]]> http://stockmarketbeat.com/blog1/2006/05/16/contingent-convertible-notes-crdn-case-study/#comment-21 Mighty Bargain Hunter » The Carnival of Investing Mon, 22 May 2006 13:21:13 +0000 http://stockmarketbeat.com/blog1/2006/05/16/contingent-convertible-notes-crdn-case-study/#comment-21 [...] A technical case-study discussion of contingent convertible bonds is over at Stock Market Beat. [...] […] A technical case-study discussion of contingent convertible bonds is over at Stock Market Beat. […]

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