the convertiable are a simple transaction that works both...

the convertiable are a simple transaction that works both ways!
The holder has the right to convert after 2 years and the issuer has the right to re purchase.

1) LNC can repurchase
How?
Simple, all you need to do is to find another lender or issue another series of bonds at a higher rate than 7% and re purchase the outstanding convertables.That won't be hard to do pretty much like swapping bank cards!

So there is no need for you to be concerned about the water down effect and how LNC's shareholders equity is going to be watered down cos it is a very unlikely scenario Mr Doom.