The very next day, Mentor announced that it would commence selling $220 million in bonds which could be converted to stock if the company is sold. The bonds would reduce Mentor’s annual interest payment on its debt to 4% from 6.25%.
The counter move outraged Icahn, who sent three letters denouncing it. In his March 31 letter to the board, he asked the company to make all of the terms of the convertible debt offering public, arguing: "Your basis for rejecting our offer to acquire Mentor Graphics was that it 'undervalues the company and its future prospects.’ Yet, one day later, you announced the issuance of convertible notes, but maintained sub rosa the fact that it may be massively dilutive to shareholders if the company is sold."
In one of his letters, Icahn offered to loan Mentor the $220 million of his own money to pay of its debt, at 6.25% interest, which the company also rejected.
On March 31, Casablanca Capital, a company with the second largest stake in Mentor Graphics at 5,205,282 shares (4.7%), concurred with Icahn’s censure of the debt offering. It filed a 13D reporting that they sent a letter objecting to the board’s objection to the buyout and subsequent offer of debentures. In the letter, CEO Douglas Taylor said it was "an ill-timed and ill-conceived action that serves to dilute shareholders, increase the costs for potential buyers, and further entrench the company's leadership."