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Case
study Prof. Ian Giddy, New York University
Golden Telecom, Inc., together with its subsidiaries, provides
integrated telecommunications and Internet services throughout Russia
and other countries of the Commonwealth of Independent States (CIS). It
offers competitive local exchange carrier services using its overlay
network in Moscow, Kiev, St. Petersburg, Nizhny Novgorod, Samara,
Kaliningrad, and Krasnoyarsk; data and long-distance services using a
fiber optic and satellite-based network, including approximately 200
combined access points in Russia and CIS; dedicated and dial-up
Internet access to businesses and consumers; Internet content through
various Web brands powered by its ROL portal; and mobile services. The
company offers these services to corporate network customers, corporate
end-users, small and medium enterprises, fixed-line operators, cellular
operators, and the mass market. The company was incorporated in 1999
and has its principal executive office in Moscow, Russia. In 2002 Golden listed its shares in the NASDAQ market in the USA.
In June 2005, Golden (GLDN) was considering issuing $200 million of a 2.25% 5-year convertible bond. The bonds would be issued at par with a face value of $1000. Each bond would be convertible into 30 shares.Golden’s rating was BB-, and the shares had an annual volatility of about 25%. The company paid $0.80/share dividends. The underwriting fees were estimated at 2%. Questions 1. What is the conversion premium? Links goldentelecom.com biz.yahoo.com ft.com bondsonline.com cfo.com (for a convertible bond model) numaweb.com (for another convertible bond model) |