Contingent convertible financial instruments

• US 20050160025A1
• Filed: 08/12/2002
• Published: 07/21/2005
• Est. Priority Date: 08/10/2001
• Status: Abandoned Application

• Current Assignee: Bank of America Corp.
• Original Assignee: Bank of America Corp.
• Inventors: Fiddle, Frederick, Birle, James R., Steifman, Eric, Epelbaum, Yonathan, Edwards, Jeffrey N, Luciano, Richard P, Green, Richard J, Jones, Emerson P, Stein, Russell L, Kerstein, Daniel Y, Kaplan, Todd K, Pepe, Paul A, Warble, Brennan J, Kaperst, Stuart C, Patrick, Thomas H Jr.
• Application Number:
  US10/480,350
• Publication Number:
  US 20050160025A1
• Time in Patent Office: Days
• US Class Current: 705/37
• CPC Class Codes: B42D 15/00 Printed matter of special format or style not otherwise provided for
• CPC Class Codes: G06Q 20/381 Currency conversion
• CPC Class Codes: G06Q 20/405 Establishing or using transaction specific rules
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/08 Insurance
• CPC Class Codes: G07F 17/42 for ticket printing or like apparatus , e.g. apparatus for dispensing of printed paper tickets or payment cards

Abstract

A contingent convertible debt instrument contains a provision permitting conversion only if any of certain economically substantial contingencies is satisfied. For example there may be a provision that conversion is permitted only if the issuer'"'"'s stock price reaches some price, defined as some predetermined price substantially higher than the conversion price, is reached. This contingent conversion trigger price may be 110% or 120% more of the conversion price. The debt instrument may be a negotiable long-term zero-coupon note, and a provision may be included that the number of underlying instruments issuable or deliverable at conversion or exchange is adjusted under certain circumstances (e.g., merger, acquisition, or formulae amounts). Corresponding methods and systems are employed for offering and servicing such financial instruments.

Claims

7. A financial instrument issued by an entity with respect to a borrowed principal amount, indicia of ownership of the entity trading at a price, the instrument comprising:

a provision obligating the entity to repay the principal according to a predetermined term;

a provision making the instrument convertible into a predetermined number of indicia of ownership of the entity at a predetermined conversion price upon a contingency;

a provision defining the contingency as an event, occurring during the term, of indicia of ownership of the entity reaching a value that is in a predetermined relationship with the conversion price.

8. The financial instrument of claim 7 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least the conversion price.

9. The financial instrument of claim 7 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 110% of the conversion price.

10. The financial instrument of claim 7 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 120% of the conversion price.

11. The financial instrument of claim 7 wherein the instrument further comprises a provision obligating the entity to make cash interest payments prior to maturity according to a predetermined schedule.

12. An offering document offering financial instrument issued by an entity with respect to a borrowed principal amount, indicia of ownership of the entity trading at a price, the instrument comprising:

a provision obligating the entity to repay the principal according to a predetermined term;

a provision making the instrument convertible into a predetermined number of indicia of ownership of the entity at a predetermined conversion price upon a contingency;

a provision defining the contingency as an event, occurring during the term, of indicia of ownership of the entity reaching a value that is in a predetermined relationship with the conversion price.

13. The offering document of claim 12 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least the conversion price.

14. The offering document of claim 12 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 110% of the conversion price.

15. The offering document of claim 12 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 120% of the conversion price.

16. A method performed with respect to an entity, indicia of ownership of the entity trading at a price, the method comprising the steps of:

issuing a financial instrument indicative of a principal amount and receiving money therefor;

promising, pursuant to the financial instrument, to repay said principal upon predetermined conditions and according to a predetermined term;

promising, pursuant to the financial instrument, to allow a holder of the instrument to convert the instrument into indicia of ownership of the entity at a conversion price upon a contingency, the contingency being other than the mere passage of time; and

converting the instrument upon the holder'"'"'s request if the contingency is satisfied.

1. A method performed with respect to an entity, indicia of ownership of the entity trading at a price, the method comprising the steps of:

issuing a financial instrument indicative of a principal amount and receiving money therefor;

promising, pursuant to the financial instrument, to repay said principal upon predetermined conditions and according to a predetermined term

promising, pursuant to the financial instrument, to allow a holder of the instrument to convert the instrument into indicia of ownership of the entity at a conversion price upon a contingency, the contingency comprising an event, occurring during the term, of indicia of ownership of the entity reaching a value that is in a predetermined relationship with the conversion price; and

converting the instrument upon the holder'"'"'s request if the contingency is satisfied.

2. The method of claim 1 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 100% of the conversion price.

3. The method of claim 1 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 110% of the conversion price.

4. The method of claim 1 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 120% of the conversion price.

5. The method of claim 1 further comprising promising, pursuant to the financial instrument, to make cash interest payments prior to maturity according to a predetermined schedule.

6. The method of claim 1 further comprising the step of issuing the financial instrument as a physical document.

17. The method of claim 16 wherein the contingency further comprises an event, occurring during the term, of indicia of ownership of the entity reaching a value that is in a predetermined relationship with the conversion price.

18. The method of claim 16 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 100% of the conversion price.

19. The method of claim 16 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 110% of the conversion price.

20. The method of claim 16 further comprising the step of issuing the financial instrument as a physical document.

18-1. The method of claim 16 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 120% of the conversion price.

19-2. The method of claim 16 further comprising promising, pursuant to the financial instrument, to make cash interest payments prior to maturity according to a predetermined schedule.

21. A financial instrument issued by an entity with respect to a borrowed principal amount, indicia of ownership of the entity trading at a price, the instrument comprising:

a provision obligating the entity to repay the principal according to a predetermined term;

a provision making the instrument convertible into a predetermined number of indicia of ownership of the entity at a predetermined conversion price upon a contingency;

a provision defining the contingency as an event, occurring during the term, other than the mere passage of time.

22. The financial instrument of claim 21 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least the conversion price.

23. The financial instrument of claim 21 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 110% of the conversion price.

24. The financial instrument of claim 21 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 120% of the conversion price.

25. An offering document offering a financial instrument issued by an entity with respect to a borrowed principal amount, indicia of ownership of the entity trading at a price, the instrument comprising:

a provision obligating the entity to repay the principal according to a predetermined term;

a provision making the instrument convertible into a predetermined number of indicia of ownership of the entity at a predetermined conversion price upon a contingency;

a provision defining the contingency as an event, occurring during the term, other than the mere passage of time.

26. The offering document of claim 25 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least the conversion price.

27. The offering document of claim 25 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 110% of the conversion price.

28. The offering document of claim 25 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 120% of the conversion price.

29. A method performed with respect to an entity, indicia of ownership of the entity trading at a price, the method comprising the steps of:

issuing a financial instrument and receiving money therefor;

promising, pursuant to the financial instrument, to allow a holder of the instrument to convert the instrument to indicia of ownership of the entity at a conversion price upon a contingency, the contingency comprising an event, occurring during the term, of indicia of ownership of the entity reaching a value that is in a predetermined relationship with the conversion price; and

converting the instrument upon the holder'"'"'s request if the contingency is satisfied.

30. The method of claim 29 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 110% of the conversion price.

31. The method of claim 29 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 120% of the conversion price.

32. A financial instrument issued by an entity, indicia of ownership of the entity trading at a price, the instrument comprising:

a provision making the instrument convertible into a predetermined number of indicia of ownership of the entity at a predetermined conversion price upon a contingency;

a provision defining the contingency as an event, occurring during the term, of indicia of

ownership of the entity reaching a value that is in a predetermined relationship with the conversion price.

33. The financial instrument of claim 32 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least the conversion price.

34. The financial instrument of claim 32 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 110% of the conversion price.

35. The financial instrument of claim 32 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 120% of the conversion price.

36. An offering document offering a financial instrument issued by an entity, indicia of ownership of the entity trading at a price, the instrument comprising:

a provision making the instrument convertible into a predetermined number of indicia of ownership of the entity at a predetermined conversion price upon a contingency;

a provision defining the contingency as an event, occurring during the term, of indicia of ownership of the entity reaching a value that is in a predetermined relationship with the conversion price.

37. The offering document of claim 36 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least the conversion price.

38. The offering document of claim 36 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 110% of the conversion price.

39. The offering document of claim 36 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 120% of the conversion price.

40. A method performed with respect to an entity, indicia of ownership of the entity trading at a price, the method comprising the steps of:

issuing a financial instrument receiving money therefor;

promising, pursuant to the financial instrument, to allow a holder of the instrument to convert the instrument to indicia of ownership of the entity at a conversion price upon a contingency, the contingency being other than the mere passage of time; and

converting the instrument upon the holder'"'"'s request if the contingency is satisfied.

41. The method of claim 40 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 110% of the conversion price.

42. The method of claim 40 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 120% of the conversion price.

43. A financial instrument issued by an entity, indicia of ownership of the entity trading at a price, the instrument comprising:

a provision making the instrument convertible into a predetermined number of indicia of ownership of the entity at a predetermined conversion price upon a contingency, the contingency being other than the mere passage of time.

44. The financial instrument of claim 43 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least the conversion price.

45. The financial instrument of claim 43 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 110% of the conversion price.

46. The financial instrument of claim 43 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 120% of the conversion price.

47. An offering document offering a financial instrument issued by an entity, indicia of ownership of the entity trading at a price, the instrument comprising:

a provision making the instrument convertible into a predetermined number of indicia of ownership of the entity at a predetermined conversion price upon a contingency, the contingency being other than the mere passage of time.

48. The offering document of claim 47 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least the conversion price.

49. The offering document of claim 47 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 110% of the conversion price.

50. The financial instrument of claim 47 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 120% of the conversion price.

51. A method performed with respect to a first entity, the method comprising the steps of:

issuing a financial instrument and receiving money therefor;

promising, pursuant to the financial instrument, to allow a holder of the instrument to exchange the instrument for indicia of ownership of a second entity at an exchange price upon a contingency, the contingency comprising an event, occurring during the term, of indicia of ownership of the second entity reaching a value that is in a predetermined relationship with

the exchange price; and

exchanging the instrument upon the holder'"'"'s request if the contingency is satisfied.

52. The method of claim 51 wherein the contingency further comprises the indicia of ownership of the second entity reaching a value that is at least 110% of the exchange price.

53. The method of claim 51 wherein the contingency further comprises the indicia of ownership of the second entity reaching a value that is at least 120% of the exchange price.

54. A financial instrument issued by a first entity, the instrument comprising:

a provision making the instrument exchangeable into a predetermined number of indicia of ownership of a second entity at a predetermined exchange price upon a contingency;

a provision defining the contingency as an event, occurring during the term, of indicia of ownership of the second entity reaching a value that is in a predetermined relationship with the exchange price.

55. The financial instrument of claim 54 wherein the contingency further comprises the indicia of ownership of the second entity reaching a value that is at least the exchange price.

56. The financial instrument of claim 54 wherein the contingency further comprises the indicia of ownership of the second entity reaching a value that is at least 110% of the exchange price.

57. The financial instrument of claim 54 wherein the contingency further comprises the indicia of ownership of the second entity reaching a value that is at least 120% of the exchange price.

58. An offering document offering a financial instrument issued by a first entity, the instrument comprising:

a provision making the instrument exchangeable into a predetermined number of indicia of ownership of a second entity at a predetermined exchange price upon a contingency;

a provision defining the contingency as an event, occurring during the term, of indicia of ownership of the second entity reaching a value that is in a predetermined relationship with the exchange price.

59. The offering document of claim 58 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least the conversion price.

60. The offering document of claim 58 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 110% of the conversion price.

61. The offering document of claim 58 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 120% of the conversion price.

62. A method performed with respect to a first entity, the method comprising the steps of:

issuing a financial instrument receiving money therefor;

promising, pursuant to the financial instrument, to allow a holder of the instrument to exchange the instrument for indicia of ownership of a second entity at an exchange price upon a contingency, the contingency being other than the mere passage of time; and

exchanging the instrument upon the holder'"'"'s request if the contingency is satisfied.

63. The method of claim 62 wherein the contingency further comprises the indicia of ownership of the second entity reaching a value that is at least 110% of the exchange price.

64. The method of claim 62 wherein the contingency further comprises the indicia of ownership of the second entity reaching a value that is at least 120% of the exchange price.

65. A financial instrument issued by a first entity, the instrument comprising:

a provision making the instrument exchangeable into a predetermined number of indicia of ownership of a second entity at a predetermined exchange price upon a contingency, the contingency being other than the mere passage of time.

66. The financial instrument of claim 65 wherein the contingency further comprises the indicia of ownership of the second entity reaching a value that is at least the exchange price.

67. The financial instrument of claim 65 wherein the contingency further comprises the indicia of ownership of the second entity reaching a value that is at least 110% of the exchange price.

68. The financial instrument of claim 65 wherein the contingency further comprises the indicia of ownership of the second entity reaching a value that is at least 120% of the exchange price.

69. An offering document offering a financial instrument issued by a first entity, the instrument comprising:

a provision making the instrument exchangeable into a predetermined number of indicia of ownership of a second entity at a predetermined exchange price upon a contingency the contingency being other than the mere passage of time.

70. The offering document of claim 69 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least the conversion price.

71. The offering document of claim 69 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 110% of the conversion price.

72. The offering document of claim 69 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 120% of the conversion price.

73. A method performed with respect to an entity, the method comprising the steps of:

issuing a financial instrument and receiving money therefor;

promising, pursuant to the financial instrument, to allow a holder of the instrument to exchange the instrument for an underlying reference at an exchange price upon a contingency, the contingency being other than the mere passage of time; and

exchanging the instrument upon the holder'"'"'s request if the contingency is satisfied.

74. The method of claim 73 wherein the contingency further comprises the underlying reference reaching a value that is at least 110% of the exchange price.

75. The method of claim 74 wherein the contingency further comprises the underlying reference reaching a value that is at least 120% of the exchange price.

76. A financial instrument issued by a first entity, the instrument comprising:

a provision making the instrument exchangeable into a predetermined number of an underlying reference at a predetermined exchange price upon a contingency, the contingency being other than the mere passage of time.

77. The financial instrument of claim 76 wherein the contingency further comprises the indicia of ownership of the second entity reaching a value that is at least the exchange price.

78. The financial instrument of claim 76 wherein the contingency further comprises the indicia of ownership of the second entity reaching a value that is at least 110% of the exchange price.

79. The financial instrument of claim 76 wherein the contingency further comprises the indicia of ownership of the second entity reaching a value that is at least 120% of the exchange price.

80. An offering document offering a financial instrument issued by a first entity, the instrument comprising:

p1 a provision making the instrument exchangeable into a predetermined number of indicia of ownership of a second entity at a predetermined exchange price upon a contingency the contingency being other than the mere passage of time.

81. The offering document of claim 80 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least the conversion price.

82. The offering document of claim 80 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 110% of the conversion price.

83. The offering document of claim 80 wherein the contingency further comprises the indicia of ownership of the entity reaching a value that is at least 120% of the conversion price.