Take-Two takes $100 million in 'convertible senior notes,' we poke Pachter to explain

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Take-Two takes $100 million in 'convertible senior notes,' we poke Pachter to explain

Take-Two announced today it intends to offer $100 million of "convertible senior notes" due in 2014. We have not a clue what that means, so we contacted Wedbush Morgan analyst Michael Pachter, who not only is a master of prognostication, but apparently knows quite a fair share about business (for real!). Pachter explains:
  • Convertible - "Means that the debt can be repaid with stock at the borrower's option."
  • Senior -- "Means that it stands in line ahead of all other debt in the case of bankruptcy -- not likely, but it makes the interest rate lower."
  • Note -- "Is debt."
Pachter explains it appears to him that the company is borrowing for a five year term in order to repay its line of credit, which has a high interest rate. That leaves the line of credit available to take if Take-Two ever needs "cash in the future for operations or acquisitions."

Thanks, Michael!

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