Q: If you have been this today do not bother answering this question. The rights issued by CSU as a special dividend. Why is CSU bothering with financial engineering rather than just running the company. This appears to be a wasteful cost and use of company brain power for no fundamental gain.
5i Research Answer:
Because of CSU's stellar history, it is hard for us to second-guess management. Its inflation-linked debentures are very popular, and CSU does not want to issue any new stock and dilute shareholders. It may be planning a big acquisition, or, just wants to raise some non-dilutive capital. It may think inflation is going to drop and thus these bonds may become a lower cost of capital than other securities over time. But CSU also thinks of ALL stakeholders, and current bond holders may want more of an illiquid security and may appreciate the rights issue.