http://www.loc.gov/mods/v3 http://www.loc.gov/standards/mods/v3/mods-3-2.xsd
a convertible bond with a call-spread overlay
In December 2012, Encore Capital (Encore) was reviewing a proposal for an issue of convertible bonds to qualified institutional buyers, raising USD 115 million at an annual coupon of 3.0%, with a conversion premium of 25% above the stock price at issue. Simultaneously, with issuing the convertible bond, Encore would purchase a "bond hedge" in the over-the-counter equity derivatives market and sell warrants at 75% above the stock price at issue. The bond hedge and warrants' sale constituted the "call-spread overlay." Concurrent with the transaction, Encore would repurchase shares worth USD 25 million from the proceeds of the convertible bond issue. Encore had to decide whether to go ahead with the convertible bond issue.