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Fleetwood Enterprises Inc. plans to convert another $39.1 million worth of trust-preferred securities into common stock, the company announced earlier this week.
Most likely, the holders of the trust-preferred securities, which combine attributes of stock and debt and which pay a 9.5% annual rate of interest, will be converted into a little more than 3 million shares of Fleetwood common stock. The 3 million shares have been included in Fleetwood’s previous calculations for “fully diluted” earnings per share, said Lyle Larkin, Fleetwood’s treasurer.
It is assumed the conversion will be made into common stock, instead of cash, because the holders of the trust-preferred will be trading securities valued at $12.56 each for a common stock that closed at $14.22 a share in New York Stock Exchange trading Thursday (May 6), Larkin said.
The holders of the trust-preferred securities have until 5 p.m. New York City time on June 3 to decide whether to convert them into common stock.
Late last month, Fleetwood converted $150 million worth of trust-preferred securities, which also paid a 9.5% rate of interest, into common stock. The holders of those securities received almost 14.5 million Fleetwood common shares.
Fleetwood now has 53.6 million shares outstanding.
Fleetwood has another $201 million worth of trust-preferred securities outstanding paying 6% interest. But Fleetwood’s stock price must climb above $48.72 a share before those securities can be converted into common stock, Larkin said.
Fleetwood also has $100 million worth of subordinated debt outstanding that the company does not have the resources to repay, he added.
Fleetwood issued the trust-preferred securities and subordinated debt a few years ago when it was incurring huge net losses and needed to raise cash. The fact the company can now afford to redeem some of the trust-preferred securities is an indication it is regaining its financial health, Larkin said.