Lehman analyst: Greater Bay dividend increase will not trigger conversion ratio adjustment on new issue

By Ronda Fears

Nashville, March 25 - Greater Bay Bancorp's increase to its common stock dividend, announced earlier this week, will not result in an adjustment to the conversion ratio on the new convertible the company sold about a week prior to the dividend bump, said Lehman Brothers head of U.S. convertible research Venu Krishna.

On Tuesday, Greater Bay announced a 6% common dividend increase to $0.1425 per share from $0.135 per share.

Greater Bay's new 0% convertible due 2024, sold a week ago, provides yield-based dividend protection language in the form of a conversion ratio adjustment with a 1% threshold applicable to the conversion ratio.

Thus, Krishna said, no conversion ratio adjustment will be made at the present time since the dividend increase results in the ratio changing by only 0.027%. The conversion ratio will be updated in March 2005, he said, to the estimated 23.7645 level if no additional adjustments are accrued, or the 1% threshold is reached over the next year.

The new quarterly dividend increase would have had to be roughly $0.405 - assuming the same 10-day average stock price of $27.60 - to effect a 1% conversion ratio change, he said.

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