Sideswiped by Convertibles
For companies in search of cheap financing during the end of the '90s boom, convertible bonds seemed the closest thing to free money. These hybrid securities -- in which bonds eventually can be converted into equity if a share-price target is hit -- gave telecom and energy companies such as Lucent Technologies (LU ) and Calpine (CPN ) the best of all possible worlds. By issuing bonds that featured a large balloon payment of debt and accrued interest years later, companies still enjoyed huge tax breaks.
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