Strategic Equity Transactions around Convertible/Exchangeable Bonds

This chapter examines strategic equity transactions built around convertible or exchangeable bonds. I will start by analyzing the structure around an exchangeable issued with a third-party guarantee. I will continue analyzing how Novartis issued a convertible bond through a third party to avoid a potential tax charge on its own shares. Then, I will analyze how Richemont crystallized gains in a convertible bond investment through warrants. Later, I will describe how Deutsche Bank monetized a stake with an exchangeable and a put option. Next I will analyze strategies to increase or decrease the likelihood of conversion with two cases: one from CSM and another from Microsoft. Next I will describe a transaction that allowed a double issuance of exchangeable bonds. I will continue with Cap Gemini's repurchase of conversion rights and repurchases of convertible bonds. Finally, I will give an example of pre-IPO convertible bonds.


4.1.1 Case Study: Controlinveste's Exchangeable Bonds on Portugal Telecom

Sometimes a private entity owns a substantial stake in a public company. A common thread of these private entities is the following: the founder and majority owner of a privately owned successful business acquires a significant stake in a publicly traded blue chip to diversify his/her assets. In a weak market environment, the owner wants to raise financing, but ...

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