aglondon, I agree, however for the Company it's unlawful to operate solely in the interest of one certain shareholder. This toxic debt (death spiral financing) is not only harming a lot of shareholders but also the Company itself and it's ability to obtain other financing. So normally it should be in the Company's greatest interest to get rid of it's debentures, which they could get rid of at any time. To ignore the shareprice action resulting from debenture holder's shorting & converting debentures into common shares would in my opinion prove the case of discrimination.
www.sec.gov/answers/convertibles.htm "Companies should also understand the terms and risks of convertible security arrangements so that they can appropriately evaluate the issues that arise. Companies entering into these types of convertible securities transactions should understand fully the effects that the market price based conversion ratio may have on the company and the market for its securities. Companies should also consider the effect that significant share issuances and below market conversions have on a company's ability to obtain other financing."
That's what looks like being in the cards (I hope to be contradicted by a more positive outcome, one in which not all debentures will be converted and the dilution impact will be small; unlikely though).
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