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Paul Latronica

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2022-08-29

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2022-08-29

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1. “The decision to convert, and that bond can be worth 160, 170, 200. So unlike traditional debt, the bond can have a lot more upside, which is obviously correlated to the underlying equity.”

   2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT

2. “It has an equity option attached to you, attached to it that can just different impacts upon the evaluation, different than straight debt converts if the equity option is out of the money will eventually mature par outside of any credit event within the company, right? There's no default, there's no credit event in the years to maturity, that bond will mature par. Unlike other street debt, it doesn't have to mature at par. the investor at that point at that point as you approach the maturity really has the choice to decide you know what's worth more at this point is it the equity portion of the of the the bond that i own or is it the fixed income portion um because ultimately the fixed income portion will mature at 100 or you know 1000 the face value but if that stock is worth more at that point the investor can make”

   2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT

3. “Company or double B Tech Company for three years out. So that bond will trade to a discount to par with a yield. Conversely, that stock is moving higher up the chain. And now this equity option is through the strike and in the money. Now this bond is going to trade highly correlated. The word delta, the correlations of the underlying equity will have a very higher delta and be much more correlated to the underlying equity moves. So that would have more equity characteristics. One of the confusing things that people have or confusing things about the market is how do you treat a bond or convertible bond like you can't treat them all the same way because the risk characteristics are very different just depending on what point of the curve that option is sitting so strip it out basic it's straight debt basic coupon has a maturity the only difference”

   2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT

4. “Bonds can be very different characteristic wise depending on where the equity is trading at any one point relative to where it's issued. So if you think about options and how options work, right? A bond is issued and has a strike price of a $35 strike price on an option and the stock is trading at 30. It doesn't have that much like it has correlation to the underlying equity, but it's not like a one-for-one correlation. So if that equity price is to move higher, go through that strike and move up the curve and say trade at 40 or $50, now that equity options in the money and it trades one for one with the underlying stock. So if you think about convertible bonds, depending on where that option is, right, the characteristics are extremely different. So out of the money option, the bond is more influenced by the fixed income value, right? What's the yield to maturity of a double?”

   2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT

5. “Sure, sure. And a lot of things you said are absolutely true. Converts are kind of a derivative product because they have both aspects of debt as well as equity. So if you think break it down what a convertible bond truly is, it's debt of a company. A company issues it into the marketplace. It pays coupon semi-annually like any other piece of straight debt and it has a set maturity. The only difference is when this securities issued into the marketplace for reasons that why people issue converts for those reasons, the company is willing to give the investor a certain amount of fixed amount of common stock, right? So in the life of that bond, the pricing or the valuation gets influenced at certain points by either the equity value, the option value, or the fixed income value, right? So convert.”

   2022-08-29 · Forward Guidance · Convertible Bonds: The Everything Asset Class | Paul Latronica · IDENTIFIED FROM THE TRANSCRIPT