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Description of Convertibles |
With the emergence of new markets and innovation in existing markets, convertibles are becoming increasingly popular with issuers and investors worldwide.
This book examines them in theory and practice, from both the issuer's and the investor's point of view. Fully updated, it includes expanded summary and new issuance information, PLUS a new chapter on the documentation process.
Essential reading for:
- Individual and institutional investors
- Securities analysts
- Sales staff
- Investment bankers
- Potential issuers
- Planning departments
- Lawyers and accountants
These hybrid instruments are becoming increasingly popular with issuers and investors world-wide. This new edition examines them in theory and practice, deals with convertibles from the perspectives of both investor and issuer. Eight chapters provide analysis of the advantages and disadvantages of convertibles over other instruments, a detailed statistical analysis of the instrument in the Euromarkets and domestic markets, and profiles of issuers from developed and emerging markets. Includes a reworked chapter on new issuance with contributions from Freshfields.
EXTRACT:
When the first edition of Convertibles: An International Perspective appeared in 1994 it came at a time when the convertible market had enjoyed several years of steady growth. This growth had been in a number of different areas. First, the overall size of the Euromarkets had seen a growth in size from just under US$5 billion of new issues in 1990 to just over US$17 billion in 1993. Secondly, the range of issuers had grown from a previous dependency on issuers from developed countries to one where the fastest growing sector of the market consisted of companies from emerging markets. The increase in the range of issuers was also matched by a rise in the number of investors participating in the markets. The major domestic markets of the United States, Switzerland and Japan were also growing, and becoming increasingly open to issuers from outside their own domicile. Thirdly, the range and complexity of the instruments offered in the international convertible market was growing. Increasingly complex structures were adapted in the Euromarkets from innovations in the US domestic markets.
A second edition is now needed because the factors that spurred the previous growth of the international convertible markets have continued, but with one unsettling proviso - the dramatic loss of confidence in the Asian markets that developed during 1997. There is strong evidence that the momentum driving the growth of the international convertible market continued. First, the overall size of Euromarket new issues grew over the period from US$17 billion in 1993 to a peak of just under US$28 billion in 1997. The growth was not steady throughout the period however and the market slumped in 1995 to just over US$9 billion. Some of the other major markets such as the Japanese domestic market were even more volatile with new issues collapsing from a 1996 total of US$28 billion to only US$2 billion in 1997. Secondly, in the period prior to 1997 the growth in the number of countries whose issuers could access the markets also continued to expand. Eastern European corporates from Poland and Russia were joined by issuers from Cyprus and South Africa. Issuers from Asian and Latin American markets also began to come to the US domestic market. Thirdly, more complex convertible structures were being developed for increasingly esoteric issuers - a zero coupon convertible for a fast-growing corporate in the Philippines being one notable example of that trend. Even governments were able to take advantage of the markets with both Pakistan and Italy using the convertible structure to sell down state holdings in companies. The Singapore state holding company, Temasek, began 1998 with a giant convertible issue into part of its remaining stake in Singapore Telecommunications - raising US$1,150 million during a lull in the Asian crisis.
However, by 1997 the convertible market was dogged by the Asian crisis and the reverberations this had both within Asia and further afield in other emerging markets such as Russia and South Africa. The second half of 1997 saw a dramatic fall in the number of Asian issuers in the convertible market, and only an increase in issuing activity from Europe and North America kept issuing volume up during 1997 as a whole. The uncertainty produced by the Asian crisis and the effects of its resolution will determine whether the growth witnessed for much of the 1990s continues into the next decade.
Prices for orders being shipped outside GB
USA - US$170
HK - HK$
Canada - US$170
Europe - US$170
ROW - US$70
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Contents of Convertibles |
1. Understanding convertibles
Basic terms and analysis
Different convertible types
2. Basic conditions and calculations
Key terms and conditions
Methods of valuing convertibles
3. The issuer's perspective
Issuer criteria
Exchangeable convertibles
A convertible issue compared with an equity issue
A convertible compared with a bond with equity warrants
4. The new issue process
Appointment of a lead manager
Different participants' roles
Authorisations and consents
Obtaining a listing
Exchangeable and synthetic convertibles
5. Documentation
Mandate letter
Corporate authorisations
Invitation telex
Offering circular
Subscription, trust and paying agency agreements
Legal confirmations
Exchangeable bonds
Appendix: IPMA standard forms
IPMA Screen and Telephone Invitation Check-list for issues of debt and equity related debt instruments
IPMA Dislosure Check-list for issues of offerings of equity or equity-linked instruments
Explanatory notes relating to issues of debt and equity-related debt instruments
Standard Form Agreement Among Managers Versions 1,2 and 3; French, German and New York Law Versions
IPMA Standard Terms for Subscription Agreements
6. Accounting and tax treatment
Accounting for convertibles
Tax treatment
7. The secondary market
The premium to conversion value
Share price movements
Interest rate movements
Changes in the creditworthiness of the issuer
Type of instrument
The influence of foreign exchange rates
Terms and conditions
Emerging market convertibles
8. The investor's perspective
Preservation of capital
Potential conversion into equity
Income
Complexity
Bankruptcy and financial distress
Currency and place of listing
Inefficiencies in the market
Liquidity
Access to emerging markets
Advantages and disadvantages of convertibles compared with other instruments
9. The Euromarkets
The primary Eurobond market
International equity and equity-related primary activity
The Euro-convertible sector
Major Eurobond convertible issuing currencies
Major Euro-convertible issuers by country of origin
10. Selected domestic convertible markets
United States
Japan
Switzerland
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