timpb into tim sept09

hiya

i just worked through a few moves ahead like i can never do properly in chess:

if there are 40 million of these TIMPB out there, then to redeem them timbercorp has to come up with $81 million in september 2009.

page 4 of the TIMPB prospectus
http://www.timbercorp.com.au/userdocs/1/investment%20products/debentures/documents/Timbercorp%20RPS%20Prospectus.pdf
says that on the reset date (sept09):

"Where a Holder elects to Exchange, Timbercorp must do one (or a combination) of
the following (as determined by Timbercorp):
• Convert the Timbercorp RPS into Ordinary Shares in accordance with the
Terms of Issue;
• Repurchase the Timbercorp RPS for the Repurchase Amount; or
• arrange for a third party to acquire the Timbercorp RPS from the Holder
and deliver to the Holder an amount equal to the Repurchase Amount"

it is the 'as determined by Timbercorp' that gets me (i believe some posters on this TIMPB thread mentioned it was at the choice of the holder). given Timbercorp has gearing of like 150-200% and alot of this debt needing refinancing in late 2009 through 2010, and given how tough credit markets are now (and i personally am not sure we are halfway through subprime writedowns- today's BNB shows how many more dominos can fall), i don't see Timbercorp will have much choice but to convert the TIMPB to shares in the case of Exchange (i'm sure timbercorp would be very happy to see holders continue to hold until the next reset date instead, but i can see alot of holders electing for the capital gain they are due at this redemption date).

as at right now, there are 350m timbercorp shares. if all of the 40m TIMPB are converted to shares (and as the date gets closer the share price will likely tank because of this expected extra share volume, so lets assume the maximum 4 TIM shares per TIMPB), there are all of a sudden another 160m TIM shares being held where the new shareholders may not wish to hold longterm. this would cause massive selling pressure on Timbercorp shares in Oct09, it would be bargains galore for buyers, and if you can short it with a CFD on it then i daresay do quite well.

thanks everyone for the TIMPB discussions recently here, i like the timbercorp story (have a small holding so far). i think i will sit out the TIMPB despite how tasty it looks. i am worried Timbercorp will go belly up before TIMPB resets/exchanges, i will be waiting for the cheap TIM shares in Oct09 (so long as the horizon doesn't look quite so dark by then).