Casting for converts

March 02, 2011  

Arbitrageurs meet new opportunities as convertible products evolve and traditional investors settle back in the market

By Danielle Beurteaux

At the end of January, the Nielsen Company, best known for collecting television viewing data, offered $250 million in convertible bonds as part of its $1.6 billion initial public offering package. Last November, in the biggest IPO in U.S. history, General Motors offered 87 million shares ($4.35 billion) of mandatory convertible junior preferred stock, one-third more than originally planned, as part of its $23.1 billion deal to go public.

Could these deals herald a new wave of convertible issuance, and with it the rejuvenation of convertible arbitrage? After all, that market has lost $90 billion since 2007. Convertible hedge fund managers, shaken by the market’s collapse in 2008, certainly hope so.

"The convertible market has undergone this significant, positive transformation over the last several years," says Tracy V. Maitland, president and chief investment officer of Advent Capital Management, a New York and...


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