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Stephane
The short answer is: buying the bond is like buying a Commerzbank bond
plus selling a put on SAP. If SAP stock still exists at maturity, you
would get the stock, even (and especially) if worthless.
You need to check the term sheet of the bond, however, to know for sure
what happens if SAP stops trading, is taken over, etc. I would not buy
without a term sheet clearly stating what happens in these cases.
Regards
Dan
Stephane Rodigari wrote:
>
> Hi RTer's,
>
> I would like to know the risks in investing in reverse convertibles.
> The issuer is Commerzbank, coupon is 14%, underlying share is SAP
> (German software), I do not remember the exchange ratio.
> What is the difference between this investment and the possibility of
> selling SAP Puts (apart from the fact that you need to margin the
> position when you sell the options and that the original investment is
> a bond if you buy the convertible).
> Is it possible that SAP default on the reimbursement of the bond at
> the due date? What will happen?
> Thanks for your answers,
>
> Richard
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