8 ms·

Depending on how their debt is structured if it's linked to stock price then it's possible to force a liquidity event on outstanding debt through depleting the

by raiyu 8y ago

Depending on how their debt is structured if it's linked to stock price then it's possible to force a liquidity event on outstanding debt through depleting the share price. I think the recent $960MM debt payment was actually linked to not hitting specific share price hurdles. Given the massive amount of debt they have outstanding versus capital on hand you could technically do that. However shares have to be available for shorting in order to achieve that.

soperj 8y ago
Yeah, same with the $700 million one in November.
kwindla 8y ago
There are some recent instances of companies being forced into a liquidity event by hedge funds exploiting bonds in unforeseen ways. So, way more complicated than shorting stocks, but kind of related to the parent question: Matt Levine has written a couple of excellent ruminations on the mechanics, social value or lack thereof, and ethics of this. > In Windstream, a hedge fund (Aurelius Capital Management LP) discovered that a company (Windstream Holdings Inc.) had already violated the terms of its bonds, so it bought those bonds and sued for a declaration that they were in default. Nobody agreed on the default, or manufactured it, or cut any backroom deals. Last week Aurelius won in court, and yesterday Windstream filed for bankruptcy. https://www.bloomberg.com/opinion/articles/2019-02-27/windstream-bankruptcy-will-destroy-value-eliminate-profits https://www.bloomberg.com/opinion/articles/2019-02-27/windst...
AnthonyMouse 8y ago
> However shares have to be available for shorting in order to achieve that. Is this a real barrier? Lending shares to short sellers at interest is basically free money to anyone who would be holding them regardless.
- mcguire 8y ago
  The last time I looked, I thought setting up a margin account made shares available for borrowing, but I've never received interest from borrowed shares. The interest goes to the broker?
  - optimiz3 8y ago
    Yes. However better brokers will give you a cut of the interest.
tim333 8y ago
>The $920 million in convertible senior notes expired March 1, at a conversion price of $359.87 per share. So the holder had the option of cash or shares at $359.87 each and took the cash naturally.

by raiyu 8y ago

soperj 8y ago

Yeah, same with the $700 million one in November.

kwindla 8y ago

There are some recent instances of companies being forced into a liquidity event by hedge funds exploiting bonds in unforeseen ways. So, way more complicated than shorting stocks, but kind of related to the parent question: Matt Levine has written a couple of excellent ruminations on the mechanics, social value or lack thereof, and ethics of this. > In Windstream, a hedge fund (Aurelius Capital Management LP) discovered that a company (Windstream Holdings Inc.) had already violated the terms of its bonds, so it bought those bonds and sued for a declaration that they were in default. Nobody agreed on the default, or manufactured it, or cut any backroom deals. Last week Aurelius won in court, and yesterday Windstream filed for bankruptcy. https://www.bloomberg.com/opinion/articles/2019-02-27/windstream-bankruptcy-will-destroy-value-eliminate-profits https://www.bloomberg.com/opinion/articles/2019-02-27/windst...

AnthonyMouse 8y ago

> However shares have to be available for shorting in order to achieve that. Is this a real barrier? Lending shares to short sellers at interest is basically free money to anyone who would be holding them regardless.

mcguire 8y ago
The last time I looked, I thought setting up a margin account made shares available for borrowing, but I've never received interest from borrowed shares. The interest goes to the broker?
- optimiz3 8y ago
  Yes. However better brokers will give you a cut of the interest.

tim333 8y ago

>The $920 million in convertible senior notes expired March 1, at a conversion price of $359.87 per share. So the holder had the option of cash or shares at $359.87 each and took the cash naturally.