"Chinese solar panel maker Suntech Power Holdings is at a crossroads owing to ongoing tensions between its founder and CEO, which have not been resolved, and the maturity of its bonds in March"Now 51 days until the Suntech bond maturity. The bonds are a pathetic 49 bid, which is a YTM close to 700 percent.
Meanwhile, the equity market is awfully confident. The Feb $1 put is only a nickel! Now, February options expiration is only a month before the bond maturity. If there is an exchange offer proposal, it would really need to be announced before February opex in order to have a fair shot at working.
Let's assume that an exchange offer proposal would tank the stock by 50 percent (not unlikely). In that case, the intrinsic value of this put would be 1-.88 = 12 cents. A 2.4x return!
The market seems to be telling us that an exchange offer proposal is unlikely! Fine - then isn't the alternative just a default? Where does that leave the stock and bond prices then?