Q: I also have a broker from a long way back where I have CSU and he is advising that with this convoluted system CSU has come out with that is intimidating to us older investors, my broker is telling me I will get approximately $400 in Principal amount of the Debentures and be debited approximately $530. Does that mean that I am getting $400 worth of debentures and pay $530 for them? I got the impression that I was getting money for this action CSU is taking. I do not know how many shares I have at the moment but those numbers will hopefully give you a rough idea. I am hoping I do not end up with another stock that operates in this manner. I will be waiting to hear from you before getting back to my broker. Thank you very much as usual.
5i Research Answer:
Exercising rights to buy new debentures will indeed result in a cash debit for them. The debentures are trading above par ($100) because they are inflation linked and currently paying much more in income than most bonds. But the rights are optional. Nothing has to be done. In fact the rights can be sold on the market for a small amount of cash, which is 'free' as the rights were given to all shareholders. We do consider the debentures a high quality security.