Merrill Doubles Its Pleasure on Convert Deal

Investors fell all over themselves trying to get a piece of Merrill Lynch's (MER Quote) new convertible bond issue.

Thursday morning the broker doubled the size of its convertible bond offering, to $2 billion; investors said the terms of the deal made it incredibly compelling. Together with recent similar offerings from blue-chip issuers like Ford(F Quote) and GM(GM Quote), the Merrill deal shows investors are eager to get their hands on these bonds, regardless of the negative connotations sometimes associated with them. Merrill Lynch shares fell 3% Thursday morning to $52.72.

Libor Day

Rather than offering a fixed rate, Merrill's zero-coupon convertible fluctuates with short-term interest rates. The yield on the bonds will be set according to three-month Libor minus 2%, and will be reset quarterly. (Three-month Libor, the London Interbank Offered Rate, is at 1.94% currently. There is a provision that the bonds can never yield less than zero.) ...