Replies to post #2094 on Cleveland Cliffs Inc (CLF)

[Democritus_of_Abdera]

RE: 2018 bond redemption….

I am puzzled by the fact that the market price of these bonds is greater than 100% (i.e. today, the closing price was $106.12 and it was above $105 most of the day (see: http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C585555&symbol=CLF3941513 )

I suppose that the reason can be found in the following statement in the prospectus… but I’m confused by the syntax of “equal to the greater of (1) and (2)”

Optional Redemption

We may, at our option, at any time and from time to time, redeem, prior to their maturity date, the notes on not less than 30 nor more than 60 days’ prior notice mailed to the holders of the notes, with a copy provided to the trustee. The notes will be redeemable at a redemption price, to be calculated by us, plus accrued and unpaid interest to the date of redemption, equal to the greater of (1) 100 percent of the principal amount of the notes to be redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on the notes to be redeemed (not including interest accrued to the date of redemption), discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points.

http://doc.morningstar.com/document/c61e5a47ee8b5fe6d7c5ceac4583c15b.msdoc/ (pg S-18)