# US 7,610,232 B2 · Periodic rate reset security with a conversion feature

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- Number: US 7,610,232 B2
- Document ID: US7610232B2
- Status: Granted
- Kind: B2
- Application number: 11/888,965
- Filed: 2007-08-03
- Published: 2009-02-05
- Granted: 2009-10-27
- Earliest claimed: 2007-08-03
- Inventors: James MacPherson
- Web page: https://patentgrep.com/patent/US7610232B2

## CPC

- G06Q 40/06: Asset management; Financial planning or analysis
- G06Q: INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR

## Abstract

A computer implemented method for an issuer of a periodic rate reset security with a conversion feature (PRRSC), other than a traditional convertible security issuer, to issue a PRRSC including the steps of designating the PRRSC as one of an equity or a debt instrument; designating an underlying security associated with the PRRSC; setting a conversion price and a conversion ratio for the PRRSC; designating a period for setting a periodic rate associated with the PRRSC; determining a value of the periodic rate in a market environment; and issuing the PRRSC, wherein conversion of the periodic rate reset security is non-dilutive to the net asset value and earnings per share of the underlying security of the PRRSC Issuer.

## Claims

### Claim 1

A computer implemented method for an issuer of a periodic rate reset security with a conversion feature (PRRSC), other than a traditional convertible security issuer, to issue a PRRSC comprising the steps of:
designating said PRRSC as one of an equity instrument or a debt instrument;
designating an underlying security associated with said PRRSC;
setting a conversion price and a conversion ratio for said PRRSC;
designating a period for setting a periodic rate associated with said PRRSC;
electronically determining a value of said periodic rate in a market environment; and
issuing the PRRSC, wherein conversion of said periodic rate reset security is non-dilutive to the net asset value and earnings per share of the underlying security of the PRRSC Issuer.

### Claim 2 (depends on 1)

The method of claim 1, wherein said PRRSC is one of a preferred stock, a bond, a note or a debenture.

### Claim 3 (depends on 1)

The method of claim 1, wherein said underlying security associated with the PRRSC is common stock of the PRRSC Issuer.

### Claim 4 (depends on 1)

The method of claim 1, wherein said periodic rate is one of a dividend in an instance said PRRSC is an equity instrument and an interest rate in an instance said PRRSC is a debt instrument.

### Claim 5 (depends on 1)

The method of claim 1, wherein said setting a conversion ratio comprises the step of determining the number of shares (CLSND) into which the security can be converted without diluting the earnings per share that would be generated by a leveraged, non-convertible security, where CLSND=(LSt[ACL(1+RCL)t-1]*ICL)/([AL(1+RL)t-1*RL]−(LL*iL)).

### Claim 6 (depends on 5)

The method of claim 5, further comprising the step of determining a conversion premium, where said conversion premium (%)=({[LCL/(CLSND−LSt)]−PO}*100%)/PO.

### Claim 7 (depends on 1)

The method of claim 1, wherein said PRRSC has one of a fixed or perpetual term.

### Claim 8 (depends on 1)

The method of claim 1, wherein said designating a period for setting the periodic rate comprises the step of designating one of a fixed or a variable period for setting a dividend in an instance said PRRSC is an equity instrument, and designating one of a fixed or a variable period for setting an interest rate in an instance said PRRSC is a debt instrument.

### Claim 9 (depends on 1)

The method of claim 1, wherein conversion of said PRRSC is non-dilutive to the Net Asset Value or book value of the PRRSC Issuer.

### Claim 10 (depends on 1)

The method of claim 1, wherein said market environment includes one of an auction, negotiation and electronic means of matching.

### Claim 11 (depends on 1)

The method of claim 1 wherein said auction is a Dutch auction.

### Claim 12 (depends on 1)

The method of claim 1 further comprising the step of resetting the value of the periodic rate at the termination of said set period.

### Claim 13 (depends on 12)

The method of claim 12 wherein said period is defined in contracted terms associated with said PRRSC.

### Claim 14 (depends on 1)

The method of claim 1, wherein said PIRRSC issuer is one of a Closed-End Fund, a Real Estate Investment Trust, an investment grade issuer and a special purpose vehicle issuing asset backed securities.

### Claim 15

A computer implemented method for an issuer of a periodic rate reset security with a conversion feature (PRRSC) to issue a collateralized security comprising the steps of:
acquiring assets including at least one of convertible debt, convertible preferred stock, and other convertible assets of several issuers, and acquiring at least one of warrants, options and associated underlying securities in addition to the convertible assets when the assets are not convertible; and
issuing first securities in one of a first tranches and series, wherein said first of said tranches or series includes said PRRSC, wherein said PRRSC is over-collateralized by the assets, has one of a dividend and an interest rate determined electronically and set periodically, and is convertible into a designated underlying security; and
issuing second securities in one of a second tranche and series that are subordinate to and less over-collateralized by the assets associated with the first securities of the first tranche or series.

### Claim 16 (depends on 15)

The method of claim 15 further comprising the step of issuing equity securities.

### Claim 17 (depends on 15)

The method of claim 15 further comprising the step of setting at least one of a dividend and interest rate for the PRRSC of the collateralized securities by one of an auction, negotiation, and electronic means of matching.

### Claim 18 (depends on 17)

The method of claim 17 wherein said auction includes a Dutch Auction.

### Claim 19 (depends on 15)

The method of claim 15 further comprising the step of resetting one of a dividend or interest rate associated with the PRRSC at termination of a predefined period.