H&R Block - Compelling Swap in Bonds

I have been following (and writing) on the H&R Block story recently (some would say mildly obsessed), but I felt that there is a compelling trade to be done and I can't keep it to myself.

What is this trade?  SELL HRB 5.125% due 10/30/2014 and BUY HRB 7.875% due 01/15/2013.

Lets Take a look under the hood:

SELL HRB 5.125% 2014

Recap:  Z+407, G+430 at par (3.55 ModDur)

BUY HRB 7.875% 2013

 Recap: Z+464, G+480 at par (1.95 ModDur).

Come out of a $400MM deal into a $600MM deal;

Pick 57/z, 50/g;

Shorten 1.75 years, 1.6 ModDur

put in 5pts

MUCH BETTER COVENANTS

Why does this trade exist?

2013 Details(HRB 2013 Prospectus):

• $600MM deal size;
• Unconditionally guaranteed by H&R Block, Inc;
• $101 CoC (below investment grade by EACH of the agencies);
• Coupon steps (from issue coupon, cumulative, 200bps max): 25bps if Ba1/BB+ (50bps combined); 50bps if Ba2/BB (100bps combined);75bps if Ba3/BB- (150bps combined);100bps if below B1/B+ (200 bps combined).
• Limitation on liens -subsidiary, principal property (greater of $250 million or 15% of the total consolidated stockholders’ equity carve-out);
• Governed by NY Law.

2014 Details (HRB 2014 prospectus):

• $400MM deal size;
• Unconditionally guaranteed by H&R Block, Inc;
• make-whole +20;
• NO COC
• NO INTEREST RATE STEPS
• Limitation on liens -subsidiary, principal property (greater of $250 million or 15% of the total consolidated stockholders’ equity carve-out);
• Indenture dated as of October 20, 1997

2013s trade wide to 2014s and have much better investor protection.