gnspa - question for watford, page-2

sorry, only just saw this:
GNS will pay out GNSPA or convert somewhere in the next couple of years depending on how quickly the credit crisis resolves itself. Let's make some assumptions:

- Buy GNSPA @ 49

(1) converts to equity in (guess) October 2011 based on VWAP as worst case rather than cash payout
- VWAP greater than 25 cents avoids max conversion ratio of 400 shares GNS per GNSPA
- exit strategy is to sell shares after conversion at say 20% below VWAP (assuming all GNSPA "converters" head for exits at the same time);

Above gives a rate of return of 43% PER ANNUM.

(2) if cash payout in Oct 2011, rate of return jumps to 57% PER ANNUM.

(3) If this NEVER converts or gets paid out, assuming 4% BBSW forever, yield is 18.4% PER ANNUM (forever)

All three scenarios are attractive!