Right on both counts. CY would only force retirement if it's price were above the conversion price or if it had an option to sell enough shares at or above that price. To my knowledge, it is not hedged and is counting on a price above the conversion price.
The other provision may be academic at this point - it's effect would to move the conversion date a little closer. But since it's put/call spread was abandonned, I'm not aware of any specific pressures to stop that from occurring.
Yes, but noteholders still retain which option to retire by, that is either thru conversion (repayment in stock) or thru redemption (payment in cash).
It is my understanding that only thru share price exceeding 21.75 for 20 out of 30 consecutive days before June 20, 2006 may CY elect to terminate conversion rights of the noteholders.
Agreed, as they might say in my neck of the woods, fghton's right on.
I don't think hedging would be for below the conversion price because at that point, as I understand it, it is more profitable for the noteholder to take cash instead of shares. I don't think conversion is "forced" until 21.75 share price caveat comes into play.
Thanks for digging this out. As far as I know, CY never replaced this spread - which would have netted them over $100M at one point if they'd been willing to exercise it.
More to the point, I've seen nothing to suggest that they've done any hedging in case CY stock falls below the conversion price in June. I'm pretty sure I would have noticed any publicly available information to that effect.
fghton's information in consistent with everything I've seen and I'm inclined to credit it. Beyond that, I expect CY to do something creative regarding the cash portion of their redemption.
Those spread options expired worthless.
From the '04 Annual Report
>>>In conjunction with our 1.25% Notes offering, we purchased a call spread option on 32 million of our common shares expiring in July 2004 for $49.3 million in cash. The call spread option was designed to mitigate stock dilution from conversion of the 1.25% Notes. The call spread option was restructured in May 2004 into a single contract of two equal parts maturing on August 16 and September 30, 2004. As of each of the maturity dates, the call spread option was out of the money and expired. The expiration of the call spread option had no impact on our cash balances or statement of operations in fiscal 2004.<<<
However how there was no effect on balance sheet remains to be explained.
Other developments section pretty much says it all. They have it covered in the current share count and i even heard that in a CC call awhile back When a analist asked about earnings and the nunbers that qt were being reported for the first time to reflect the dilution from the extra shares for the converts and a call spread option and puts are used to cover the deal too.
Dont know who you are talking too they are full of
...I spoke with IR re the convert issue. Suggest you do the same and report back on facts, not bull
Yes, if the company forces conversion they will be basically debt free but the current share count will be diluted with the issuance of more stock. Do you understand what "dilution" is? The cash portion can be paid with stock or debt? Are they going to use credit facilities to pay the cash portion of 180 mil? I don't think that would be a smart move. I'd sell SPWR stock to raise those funds not further "dilute" the company by issuing more stock.
Whether they issue more stock or pay if off with cash, the company still has a 600 mil debt issues to deal with before the end of this year. If they force conversion the debt is wiped out but there are more shares outstanding. What don't you understand about this very simple concept? Perhaps you and Flophead should get together and figure out what the term "dilution" means in the context of financial accounting.