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The company also sold $250 million of mandatory convertible securities, paying 9.5percentt per year and with a conversion premium of 18percentt.
It's trading around 141, convertible into 33.81 TelMex shares, for a conversion premium of 3.4%.
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The $200 spread between the price of the bond and the $800 value of the common shares into which it is convertible is called a conversion premium.
The latest batch comes with conversion premiums of up to 38% above the current share price, a long way from once-normal levels of 2-3%.
When the company is a winner, you see a shrinking of the conversion premium.
With $60 of interest a year, you earn as much as the conversion premium in a little over three years, assuming the common has no dividend.
Another way of looking at a convert is to examine its "conversion premium"–the percentage amount by which a convertible's price exceeds its conversion value.
Teco preferred sells at $26, for a current 4% to 18% conversion premium.
(The conversion premium is the amount by which the price of a convertible exceeds the value of the common stock you would get if you converted).
With the common at $57.50, your conversion premium is 25%.
In other words the conversion premium is 85%.
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