Some big breaking news today that Michael Dell's private investment firm bought $99.5M worth of debt in Red Hat. The actual transaction was in January 2004, just months after Dell began offering Red Hat Enteprise on its servers in November 2003. (I believe they still don't offer the desktop flavor, though I may be wrong). In December 2004, after the investment, Dell said Red Hat needs to lower prices or risk losing customers.
The other interesting thing to me, considering I just finished my Corporate Finance final, is the description of a debenture I've seen in most of these stories. Quoted below is the Triangle Business Journal's wording (who apparently "broke" the story):
Debentures act somewhat like bonds in that an issuer pledges a fixed return for a stated period of time. Alternately, the debentures can be converted into equity - or shares, in the case of a public company. Dell's Red Hat debentures currently are being converted into equity, according to a filing with regulators.
Now, the wording here is a bit vague, but by default a debenture is just a debt security. The difference between a bond and a debenture is that the former is secured with assets, while the latter is primarily governed by contract. A debunture can be convertible, but they give the implication that it is always convertible. (In this case, however, it seems it was - MSD converted for 3.89 million shares. And that may seem like a lot, but it's really a little over 2% of the outstanding shares).
Wow... posts like this remind me that, while I appreciate understanding what all this financial stuff means, it bores me to tears. I think I'll stick to technology, copyright, and the like.