billywilliams1920
Oct 3, 10:11 PM
$BB $BB.TSX re convertible debt:
2029 leaps just out, allows to better price financials for 2029 convertibles. (non-financial considerations left for separate discussion).
basic idea: convertible equals straight debt plus value of option to convert at 3.88 USD.
put call parity: equivalently think the owners having already converted, but with option to "put" back for cash at 3.88 .
2029 leap put, 3.88 strike, is pretty close to the traded 4 strike, which is worth about 45 cents right now.
feb 27 is the earliest bb could force conversion. at that time, trade off the put value then against the remaining interest at 3pct on the 3.88 face value per share, about 20 cents in value at that time.
purely on pricing, we are not yet at point where forcing conversion is optimal. by feb 27, with higher sp and additional theta decay, should get there. keep an eye on the 29 leap puts at 4 strike. if those drop below 20 cents by feb, forcing conversion optimal.
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