There's a war that's always being fought in financial markets - sometimes beneath the surface, sometimes in plain view - between the interests of debt holders and shareholders.
Through the depths of the recent depression in financial markets and the worst revelations of corporate excess, that conflict has been low intensity. The interests of bondholders and equity holders have become, briefly, aligned. What's been bad for one group has been bad for another. In extremis, both sides have compromised to salvage the most they can from the wreckage of the latest corporate collapse.
Last month's e2.3 billion mandatory convertible for Deutsche Telekom marks an outbreak of the old tensions. Creditors were relieved to see an over-leveraged company substantially increase the equity in its balance sheet - albeit with a three year delay. Proceeds of this deal, earlier bond deals and asset sales, provide liquidity enough to cover this year's maturing debt. Credit investors trust that the deal will head off another ratings downgrade that would inflict more losses on them.
Shareholders were less warm in their welcome. On the day the convertible was launched, furious selling of Deutsche Telekom equity wiped e5.3 billion off the company's market capitalization.