Investment Q&A

There is good and bad here. On the plus side, it reduces debt due in 2026 by $95M. It reduces overall convertible debt by $10M. It extends maturities, buying the company more time for a turnaround. The new debentures are not convertible until the stock is $40, which of course is a huge premium to current prices. On the negative side, we have a company now issuing equity-linked debentures after buying back a substantial amount of its own stock in the past year. The yield to maturity on the new debentures is 19%, indicating the weakness of the company's leveraged balance sheet. We would not consider it a good move, but more of a necessity. We never like convertible debenture financings for companies (though they can still be good investments) as they bring out more short sellers who go long the debentures and short the stock. But at least the conversion price is high here.