Investment Q&A

The warrants are essentially a vehicle to replace CSU's series I debentures, when it chooses to. Each CSU share gets one warrant (ex date Aug 23). IF, and only IF, the company decides to announce the redemption of its Series I debentures do the warrants become exerciseable. IF CSU announces the redemption, then the warrants can be used to 'swap' $100 of Series I debentures for $100 of Series II debentures. Series II are identical, except the company has no redemption rights on Series II debentures. In English: since the company has to provide Series I debenture holders with five years' notice if it wants to redeem, the warrants allow for a faster conversion into Series II debentures, as warrants can be exercised for 30 days after CSU announced its intention to redeem. So, CSU gets to replace its debentures rather than waiting five years to redeem them. If notice to redeem is given, then the warrants will start trading, and thus investors do not want to swap debentures can sell to another investor who does. For CSU, the new series gives them more 'permanent' capital (maturity in 2040) rather than (possibly) five years from the notice of the intention to redeem. Put a different way, CSU is offering debenture holders a chance to swap their bonds for the same thing, but without the five year redemption clause/notice.