Boston Properties (A)
Investment manager Eliza Baena confronts an apparent convertible bond arbitrage opportunity when she notices a narrowing spread between two Boston Properties (BXP) bonds, one a convertible bond and the other a straight bond, in the wake of the 2008 Lehman bankruptcy. Baena must decide if there is an opportunity, how to structure a trade to exploit it, and how much of her fund's capital to allocate. Case exposition includes descriptions of basic financing arrangements that support arbitrage strategies, such as rehypothecation and margin lending.
Collection: HBSP (USA)
Ref: HBS-211018-E
Format: PDF
Number of pages: 9
Publication Date: Dec 14, 2010
Language: English
Review date: Jun 20, 2011
Description
Investment manager Eliza Baena confronts an apparent convertible bond arbitrage opportunity when she notices a narrowing spread between two Boston Properties (BXP) bonds, one a convertible bond and the other a straight bond, in the wake of the 2008 Lehman bankruptcy. Baena must decide if there is an opportunity, how to structure a trade to exploit it, and how much of her fund's capital to allocate. Case exposition includes descriptions of basic financing arrangements that support arbitrage strategies, such as rehypothecation and margin lending.
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Year: 2008
Geographic Setting: United States
Industry Setting: Asset management
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