WSAHINGTON, D.C— Marriott International has spent about $347 million in cash to buy back about $400 million face value of zero-coupon senior convertible bonds maturing in 2021. According to Reuters, Marriott is just the latest company forced this year to buy back or sweeten the terms of an issue of convertible bonds, which are stock-bond hybrids. In 2000 and 2001, companies sold more than $160 billion of convertibles to benefit from low financing costs. Many, including Marriott, sold bonds with “put” options allowing holders to sell the bonds back to the issuer in one or two years. Issuers hoped their shares would rise enough so that bondholders would never exercise those options. Instead, weak stock prices made exercising those options worthwhile, reported Reuters. Holders of Marriotts convertible bonds had an option to put the bonds back to Marriott on May 8. Marriott paid those holders $867.42 per $1,000 principal. There remains about $70 million principal value of the Marriott bonds outstanding, the company said. SOURCE: Reuters
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