A Brief Note On Financial Financing

The company’s leverage ratio is 28% - 72% of its assets are financed by common equity and the company was profitable in the last reporting period. The company should easily raise additional funds from creditors and a convertible debenture will be an appealing venture for creditors who would want to purchase stocks of the company in the future.

✓ Additionally, an acquisition may result in the acquirer being exposed to a greater concentration of counterparty credit risk that did not previously exist.

o Cost of debt in this case is 12.5% though MCI can raise $ 100 million more with this option in comparison to option (a) above. Servicing this debt would be a significant drain on the cash flow. o Please see Exhibit 3. (c) $600 million Convertible offering @ 7.625% 20 year with conversion at 54 per share o Using this option MCI can raise $ 100 million more than option (b) at 4.88% lower rate of interest. It also gives MCI an option to convert it to equity once the stock price reaches 54 (it is currently 47). Based on previous convertible offerings (As per exhibit 6 of case, 1978, 1979, 1980, 1981 and 1982), MCI has been converting it to equity within 18 months because of its high growth. As higher growth is projected for the next few years (Exhibit 9 of case), MCI is expected to convert this $600 million offering to equity, thereby reducing its leverage. o This option allows to finance its current activities and match capital inflows with expected investment outlays in the near future. It also allows MCI the option to eliminate the cash flow drain from servicing the debt once the stock price increases. o As per Exhibit 3 attached here, this offering will provide capital to meet the external financing needs for 1983.

• Transaction structures—the takeover could involve a cash offer, a share offer, an asset swap or a combination of these methods. Need to consider legal, taxation and accounting issues.

leverage increases, interest rate on the total debt will increase. The Company is considering the

- if they get more debt, then it makes the company less attractive to prospect lenders since their

1 Christopher Garza Professor Sharifian GOVT 2306-71003 October 29, 2017 Financing Freedom: Interest Groups and Campaigns in Texas Winning an election for public office in Texas is no easy task. After one decides on their platform, they must condense that into a slogan, convince an apathetic public to vote, and most importantly, fund their campaign. Nothing in life is free. This includes public offices in state government. In a perfect world an individual would not have to spend a small fortune to get elected into office. We do not, however, live in a perfect world. Instead individuals attempting to win a position in the Texas State Senate can expect to spend between $70,000 and $430,000 if they want to win the election. While many

To improve their goodwill and reliability; To inflate the prices of shares that would lead to the possibly increase capital; Avoiding debt covenant restrictions as the lender’s agreement states a minimum limit of term loan of cash and unpledged receivables, working capital and net worth.

Following the acquisition, AGI can increase its leverage, thereby lowering the cost of capital (as debt is the cheaper option of funding) and generating greater tax savings from interest payments. This is made possible through the diversification benefits of larger firms (and the acquisition of Mercury), with a lower risk of

We are pleased to present to you the salient features of our proposed $5B convertible debt offering for your careful review and approval. We deemed it appropriate to walk you through the analytical process in coming up with the right mix of conversion premium and coupon rate. We initially consider a conversion premium of 25% and determine its corresponding coupon rate. We then explore the appropriateness of such a premium and explore other conversion premium-coupon rate combinations and determine which combination would be optimal for both the

With the three debt instruments in the case, hundreds of millions of dollars would become readily available to the company and be at their disposal. Each of the financing opportunities provides their own money in different forms. Great companies need these different financing ideas to

The case study of the RJR Nabisco looks at many factors that went into one of the most complex leveraged buyouts in history. Several players were involved in the bidding of the company itself: KKR, First Boston, Forstmann Little, and Management Group. The main factor of the successful acquisition of RJR is dependent on the quality of the bidding team. Looking at KKR, their strategy was to recruit every significant player so that the other bidding groups would not be able to retain them. They retained Drexel Burnham Lambert, Merrill Lynch, Morgan Stanley, and Wasserstein Perella as dealer managers for the tender offer. This left the management-Shearson bidding group with only Salomon Brothers and First Boston as significant access to capital markets, however First Boston shortly left as it was preparing for its own bid. Experts felt that with only Salomon on its team, it would be difficult finding an outlet for billions of dollars in bonds that would have to be sold to finance any buyout of RJR. Forstmann Little’s bidding group strategy was to entice corporate clients to join their bidding group with the idea of pre-selling RJR’s different business segments to them, but it did not work out in the end because RJR’s board objected to any advance selling of RJR’s businesses which implied that Forstmann’s corporate backers had to present themselves as mere investors in the bid, and not acquirers of businesses. In the end, KKR won with its “Get Them All” strategy worked in their favor in the bidding process. Despite having the higher bid $112 per share compared to KKR’s bid of $109 per share,having industry experts as members, and being on good terms with the board members, traditional factors did not determine the winner. KKR won because of the following factors: The Break-up Factor, or keeping the company intact; The Equity Factor, or provide existing shareholders with an option to participate in the buyout and thus share in any future KKR profits from the transaction; Financing Structure, where KKR was offering $500 million more equity than the management group; Employment Commitment, where KKR’s plan of offering guaranteed severance and other benefits to employees who lost their jobs because of layoffs was

Due to high investment in fixed asset the firm also need a high amount of debt in order to cover its expenses so the smooth run of business.

In November 2003, Maria Ober, a vice president of Deutsche Bank Securities, received a client request for financing the acquisition of a large hospital-supply distributor. The client needed to present the seller with an offering price and an indication of financial commitment within two weeks. The contemplated transaction entailed a highly-leveraged acquisition of the target. The tasks for the student are to value the target firm and projected synergies, assess the credit worthiness of the target (i.e., its ability to bear the high debt), and critically evaluate the general design of the transaction.

In the second week of June, 1988, executives at BW/IP International, Inc. were assembling materials for a presentation they would make to their bankers on June 15. They recently had agreed to acquire United Centrifugal Pumps (UCP) for $18.5 million. UCP 's product line complemented BW/IP 's extremely well and the managers of BW/IP 's pump division were eager to combine the two. Nevertheless, BW/IP 's bank lenders were expected to be somewhat less sanguine. Only a year ago, in May 1987, they had lent $131 million to finance a $235 million leveraged buyout (LBO) of the company. BW/IP had performed according to expectations since then, but it still carried total