Still trying to interpret the PDS of this issue. (I'm new to...

Still trying to interpret the PDS of this issue. (I'm new to hybrids.)

At the step-up date on 30 May 2011, FXJ may:

- repurchase the FXJPB for $100 cash
- convert them into ordinary shares of FXJ less a 2.5% discount
- step up the interest by 2.25%pa
- undertake a remarketing process to set a new margin

This is summarised in the PDS:



What are your thoughts as to the likely outcome, should FXJ decide to 'remarket' these hybrids? Is it likely that holders would demand a high interest rate, forcing FXJ to resell/repurchase/convert the securities? Or would the vast majority of holder select Option 1, allowing FXJ to pay the step-up margin of an additional 2.25%pa?

To me it seems that the best option if FXJ were to remarket would be to take Option 3 and bid for an unreasonably high interest rate, thus requiring FXJ to resell/repurchase/convert. (Of course this assumes that >25% of holders choose Options 2 or 3.)

My guess is that it would be in FXJ's best interests not to remarket in 2011, and to simply pay the increased interest rate.

Any other opinions?

Thanks folks.