The “certain events” have been revealed, as the 8-K is now available. In fact, as I suspected, the conversion price can be adjusted if “certain events” related to stock splits and/or additional common shares, options or warrants are issued at a price (or strike price) below the $18/share conversion price. In other words, this is not a floorless convertible or death spiral convertible or whatever you want to call it. It’s a fairly standard covertible issue.
There’s nothing nefarious going on. BAC will stand or fall on this one in direct proportion to Countrywide’s ability to stay in business and make money (or not). Theoretically, BAC can hedge away some of the principal risk, but if that were BAC’s real concern the transaction would have been structured differently. Clearly BAC believes – rightly or wrongly – that CFC’s stock will be higher at some point in the future. (Personally, I think BAC’s wrong. But that’s just my opinion.)
