Maverick wins Mandalay bid

Thu Jul 1, 2004

Even Las Vegas odds makers didn't see this one coming. A surprise $7.6 billion bid for the Mandalay Resort Group by Kirk Kerkorian's MGM Mirage unleashed massive shockwaves in June markets, proving a surprise win for equity holders, while utterly hammering many funds that were caught sitting on the target company's convertible bonds.

As word of the biggest buyout in Las Vegas history hit the street, Mandalay's common stock surged and the convertible dropped 20% on the day. On the convert side, some hedge funds holding the Mandalay floating-point convertible bond were walloped thanks to what was announced as a "cashless" buyout. Even swappers not holding Mandalay were caught like deer in the headlights when as many as 30 other convertible issues suffered sizable collateral damage as the market participants learned about a lack of cash-takeover protection the hard way.

But the great Mandalay Convertible Massacre of '04 didn't...

ISSN: 2151-1845 / CDC10004H


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