Exchangeable equity-linked security

Details Exchangeable equity-linked security Exchangeable equity-linked security

2011-04-05

2011-04-05

Colbert, Ella (Department: 3694)

Data processing: financial, business practice, management, or co

Automated electrical financial or business practice or...

Finance

C705S038000, C705S026640, C705S03600T, C705S037000, C283S117000

Reexamination Certificate

active

07921058

ABSTRACT:
A method of creating, selling, converting, and redeeming exchangeable instruments that may result in favorable tax and/or accounting treatment for a company that is a parent to an issuing subsidiary. The parent company transfers a conversion option to a wholly owned subsidiary. The subsidiary attaches the parent's conversion option to its own nonconvertible debt instrument, creating an exchangeable instrument to be issued to investors. Payment for the exchangeable instrument is remitted to the parent for the value of the conversion option and to the subsidiary with respect to the nonconvertible debt instrument. The split obligations of parent and subsidiary may result in a relatively high tax interest expense and relatively low accounting interest expense. Use of a net share settlement feature may result in reduced dilution of the parent's equity.

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