All about converts

$825m sen unsec exch coming tonight from BNP/MER. Terms: 30 yr, 0.5-0.75% up 10%, s/c 5-10 yr @120%, put & h/call 10 yr, full dvd p/thru. UOP = retire some 3.125% 21. Theory vs. reality: exchangeable w/zero ring fense so don’t use standard model (tail risk = credit in bankruptcy w/parity @ 120) –ve basis in str8/cds mkt but 10y CDS indicated 350, we’ll cap vol at 20%. Theo = 99. Now to reality: 3.25% (cpn + pass thru) up 10% @par in media space which is sparse w/obvious index inclusion = attractive to long only (despite 84 SBV). At this pt in cycle, mkt will assume table dvi 4 10 yrs (try reducing p/thru over 10y in model), zero default risk. The purpose here is highlight theory vs reality = this is not model cheap but profile/history gets it done.