I actually had the same idea you have and so I looked into the possibility of purchasing the converts through my broker. I already own a fair amount of the equity in RMBS but I also was interested in finding out what the converts were looking like and I was interested in purchasing them as a way of capturing income while also having some additional stake in the underlying shares for any upside. What I found out was that they pay five percent interest and they have five year maturity and so they are due fairly soon and that they have been selling lately right at par and, finally, there were none available to be bought. There simply was no ask being offered. I could have put out a bid but I thought it was not worth just waiting around for somebody to sell it. I asked about recent activity in the converts. I was told that there were not any trades in the RMBS converts in the past few weeks but there had been some trades before that timeframe and that there was one trade for $1 million worth of the convert, again, at par so that there was no discounting on the price. That tells me that the market fully expects RMBS to pay off. One thing I wanted to find out but could not was what the price would be for the convert to be converted into shares which would result in dilution. Does anyone know what the price would be for converting RMBS bonds into shares?
Its a broken convert-I think around 18-19$ rmbs shares so it will be paid. Its due 2014 so i was hoping it might trade around 85-90$ with the yield is a pretty good return for about 2 years to par. RMBS has 200mill in cash and the debt is for 140mill so they only have 60mill net cash so that why was hoping for the discount because I expect they will pay it off- If they are trading at 100$ obviously the market thinks so too.-thx for the reply.