Raising money: bonds, shares and rights
See which bond features investors pay more for, what a share issue or a buyback does to the equity section, and why a rights issue leaves shareholders no worse off.
Bond features: who does each one help?
Bond features: who does each one help?
Six bond features: worth more or less?
- The firm may buy the bond back at $1,040 at any time after year 5.
- Each bond can be swapped for 25 Kestrelwood shares, at the holder’s choice.
- The bonds are secured by a first mortgage on the firm’s rail yards.
- The bonds rank behind the firm’s bank loans and senior bonds.
- Holders may sell the bond back to the firm at its $1,000 face value in year 6.
- A covenant stops the firm from borrowing more than a set limit.
- A version that is both callable (a) and convertible (b). Can you tell which way its price goes?
Midterm coming up and rights issues still feel slippery?
Bring your problem sets. We work through them together until every type feels routine.
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