Convertible & Call Spread

Unlike equity or straight debt, there are a host of structuring decisions in the convertible bond itself and the derivative overlay. Transaction costs are highly variable. Pricing occurs in two or more dimensions (coupon, conversion premium) and requires an understanding of difficult-to-observe market inputs as well as model expertise. The marketing process is rapid and jargon-filled, and banks have conflicting interests throughout the process. Matthews South can help.

Both the convertible and call spread have many flavors and different accounting, tax, and change of control implications. This complexity makes it difficult for issuers to make informed decisions especially when the banks involved are conflicted in the advice they provide. We demystify the convertible and call spread execution process. In everything we do, our aim is to ensure our clients are the most informed participants and are in control of the entire process.

While banks are important partners, they are inherently conflicted as they need to serve two different client bases–issuer and investor. The investors participate in all the deals, while any issuer may only access the market every two or three years. This gives the investors significant leverage in the pricing process. The banks have an even greater conflict in the call spread because they are the counterparties.

We allow you to take control of the financing process by providing complete transparency and analytics for informed decision making. We do this with a highly experienced team that leverages the proprietary software tools we have built.

We act as an extension of your company’s deal team to assist in all aspects of the transaction from start to finish:

• Transaction Structuring Recommendations 
• Proprietary Software Analytics
• Accounting Support
• Tax Analysis 
• Syndicate Selection
• Fee Negotiation
• Call Spread Auction
• Convert Documentation
• Call Spread Documentation 
• Marketing Recommendations and Oversight 
• Oversight over the Convertible Pricing Process 
• Allocations