Role reversal

Mandatory convertibles

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In February 2003, Deutsche Telekom unleashed a tornado on the financial markets, the fallout from which is still being felt today. The company launched a €2.3 billion bond issue, maturing in 2006 and carrying a 6.38% coupon. Such a deal would under normal circumstances have caused little more than a flicker of interest. But this was no ordinary bond: it was a mandatory convertible, scourge of scores of investors and under investigation by regulators across Europe.

Between 1996 and 2000, only fo

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