If I understand correctly, the payoff of the convert with stocks will dilute the value of current shares. Here is my question... if the debt was not there, what would this stock be worth? The next question is, even with the dilution, once the convert is put to rest, what would this stock be worth?
Until we see the terms of the warrants we won't be able to calculate dilution. It appears however that these notes probably are being sold for their coupon return and the warrants are a "Kicker". Either way it is far better to have some warrants out there that may never be excercised that to have the certain dilution of issuing stock now to retire the converts.