Structure for generating a source of contingent capital

Details Structure for generating a source of contingent capital Structure for generating a source of contingent capital

2004-10-07

2010-06-29

Felten, Daniel S (Department: 3696)

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

Automated electrical financial or business practice or...

Finance

C705S037000, C705S038000, C705S039000

Reexamination Certificate

active

07747499

ABSTRACT:
Embodiments of the present invention are directed to a financing structure for generating a source of contingent capital for a company. According to various embodiments, the company enters into a put option agreement with an entity, such as a trust. The put option agreement permits the company to put preferred stock of the company to the trust. The company also enters into a warrant agreement with the trust. The warrant agreement permits the trust to buy equity securities (such as common stock) of the company or a corporate entity related to the company (e.g., a holding company) from the company. The trust issues to investors bifurcated convertible instruments. The instruments include a fixed income instrument and a warrant to purchase equity securities of the related corporate entity (e.g., the holding company). With the proceeds from the offering, the trust purchases eligible assets, such as low risk government securities which pay fixed or floating periodic interest or dividend payments. The interest rate or dividend rate on the fixed income instrument issued by the trust may match the yield on the eligible assets. The operating company's ability to put its preferred stock to the trust in exchange for the put option strike price payment provides the operating company and/or the holding company with the source of contingent (or soft) capital.

REFERENCES:
patent: 2003/0014343 (2003-01-01), Jones
“Auction Market Securities,” Merrill Lynch, Pierce, Fenner & Smith Inc., 2003.

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