What is REDTONE LA
REDTONE-LA is a 10-year 2.75% (payable annually in arrears in March each year) ICULS and can be converted into ordinary shares of RM0.10 each at any time from 4 March 2010 to the maturity date of 4 March 2020 at the rate of 10 ICULS for 4 ordinary shares.
How to convert with example:
REDTONE’s share price closed at RM0.875 while REDTONE-LA ended at RM0.34.
This provided a small arbitrage opportunity given that an investor could buy 10,000 REDTONE-LA @ 0.34 each at cost 3.4k and subsequently convert them to 4,000 ordinary shares which cost 3.5k. You earn RM 100.
On top of that, REDTONE-LA also offers a 2.75% interest due to in March 2013 that could provide some buffers to its share price.