Compal Electronics launches surprise convertible

The Taiwanese notebook manufacturer has devised a highly defensive structure to attract investors at a time of market weakness.

Using a Goldman Sachs' proprietary structure, Stock Indexed Zero Coupon Securities SIZeS, the company launched a $130 million convertible yesterday Thursday. Initially, it had been hoping to raise up to $300 million from a combined convertible and DR offering, but ruled out the latter option after realising that investors would demand huge discount pricing to spot.

With a five year final maturity subject to annual puts, the convertible has a par in par out structure, meaning that the bonds carry a zero coupon and zero yield to maturity. Investors like this because there is no downside risk, says one convertibles analyst. Whatever happens, they can...

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