This is the last day you can buy FMT Pfd (the TOPrS) and get a great deal. The situation is simple. On June 10, the confirmed bankruptcy plan will be effective and the 4-million shares of TOPrS will be exchanged for:
1) $45 million cash ($11.25 per share)
2) $39 million in 9% notes due 2016 ($9.75 per share)
3) 21 million shares of FMNTQ (5.25 shares per preferred share or $4.20 at recent prices)
Add it all together and you get $25.20 vs the current $21.80 price or a 15.6% return for a week. The obvious risk here is that the bond does not trade to par. In that case, the current $21.80 price of the preferred implies you are paying $6.35 for the bond or 65% of face value for a yield to maturity of 18%. This will be the only debt on the company, which will have a net cash balance sheet.
Looks like a pretty simple (and very attractive) arbitrage to me. Thoughts?