Corning Zero Convertible Debt

"Convertible Debentures

On November 3, 2000, Corning completed an offering of $2.7 billion of zero coupon convertible debentures which generated net proceeds of approximately $2.0 billion. The initial price of the bonds was $741.92 and yielded 2%, compounded semi-annually with a 25% conversion factor. The notes mature on November 8, 2015, and are convertible into approximately 22.6 million shares. Corning may call the debentures at any time on or after November 8, 2005. The holder can convert the debenture into Corning common stock at any time prior to maturity or redemption. The proceeds were used to finance a portion of the Pirelli acquisition."

Bond Rating In investment, the bond credit rating assesses the credit worthiness of a corporation's debt issues. It is analogous to credit ratings for individuals and countries. The credit rating is a financial indicator to potential investors of debt securities such as bonds. These are assigned by credit rating agencies such as Moody's, Standard & Poor's, and Fitch to have letter designations (such as AAA, B, CC) which represent the quality of a bond. Bond ratings below BBB/Baa are called junk bonds

Yield to Maturity is the internal rate of return (IRR, overall interest rate) earned by an investor who buys the bond today at the market price, assuming that the bond will be held until maturity, and that all coupon and principal payments will be made on schedule. Yield to maturity is actually an estimation of future return, as the rate at which coupon payments can be reinvested when received is unknown. It enables investors to compare the merits of different financial instruments.

Bond Price the theoretical fair value of a bond is the present value of the stream of cash flows it is expected to generate. Hence, the value of a bond is determined by discounting the bond's expected cash flows to the present using the appropriate discount rate.

Conersion Ratio The number of common shares received at the time of conversion...