Accounting For Proceeds From The Issuance Of Convertible Bonds And Of Debt Instruments With Separate Warrants

Debt securities included under this topic include any investment that would be considered a loan to a company, municipality or the government and its agencies. These include corporate or municipal bonds and U.S. Treasury securities and other instruments expressly stated within the codification. Equity securities covered under this section must have an easily attainable market value and include corporate stock, U.S. Treasury securities, and business investments greater than 20%. In this case, the code will dictate the method of accounting to be used as well as financial statement presentation. (GAAP) (FASB ASC 320-10-05-2, 2016).

The issuance of convertible debt will result in even more cash holdings for Intel, an additional $1 billion. This, at face value, does not solve Intel’s capital structure dilemma of having too much cash. However, Intel can afford to incur more debt financing, since it has relatively low long-term debt. By doing so, its long term debt ratio (using 1991 figure) would change to:

Securities are confirmation of either debt or ownership. They are also confirmation of related rights. Securities include not only options and warrants, but also debt and stock. (FASB ASC 505-10-50-6) Participation rights are the promised rights of the security holders. This ensures that they will receive dividends or returns from the issuing company’s profits, cash flows, or returns on investments. (FASB ASC 505-10-50-3) Preferred stock are a security that gives preference to the holder over those who hold common stock. (FASB ASC

In 2006, Merrill Lynch became the lead book runner for a $5 billion convertible bond issue for MoGen, Inc. This was the single, largest convertible bond issuance in history and required a considerable amount of effort on the part of Merrill Lynch’s Equity Derivatives Group to convince MoGen’s management to choose Merrill Lynch over its competitors. The case is focused on Merrill Lynch’s choice of the conversion premium and coupon rate to propose to MoGen management. This pricing decision requires students understand the concept of valuing a convertible as the sum of a straight bond plus the conversion option. Valuing the conversion option as a call option requires the

A convertible bond is a bond that can be converted into a pre-determined number of shares of stock. This would happen during the life of the bond. The number of shares it can be converted to is determined by the issuer of the bond, the corporation. Convertible bonds are an attractive investment. They offer the for potential market appreciation like an equity. They also offer the conservative nature and safety of a bond. A convertible bond pays you interest and gives you the option to convert it to shares of stock.

3. Compare and contrast the two debt policy alternatives outlined in case Exhibit 8 for 1987. What bond rating would Du Pont receive under each alternative? How would its financial performance, financing needs, access to capital, and financial risk differ under the two alternative debt policies?

Along with market performance, a firm may need to adapt its financial activities as well. These activities all relate to the way the firm is organized, in particular, its capital structure. Included in capital structure is the aspect of convertible bonds. These bonds can be converted to a specified amount of common stock. The downside of these convertible stocks and bonds is that they have the potential of diluting the Earnings Per Share (EPS)

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

As the title suggests, warrants are issued by companies as an alternative way to raise funds or in combination with common stock during an Initial Public Offer (IPO). It allows high growth companies to raise much needed funds if they experience cash flow difficulties during this period of the company’s lifecycle. In addition to issuing common stock to raise funds, companies who issue warrants can attract more investors and provide more benefits to the investor and the company itself.

7-1 “Debt includes all borrowing incurred by a firm, including bonds, and is repaid according to a fixed schedule of payments and Equity consists of funds provided by firm’s owners, and the stock(pg272).”

This Ppractice Nnote addresses three types of alternatives for a company to raise debt for its business purposes: (1) syndicated loan borrowings, (2) debt securities issuances, and (3) mezzanine loan borrowings. This Npractice note will describes the basic features and differences between the alternatives.

Understanding the reporting and disclosure requirements for the different types of debt regarding debt restructuring is imperative. The manager of this company has requested an explanation of the above regarding bonds payable, notes payable, and capital leases. This paper should satisfy any questions about these topics.

An arrangement may also involve debenture holders being given an extension of time for payment, releasing their security in whole or in part or exchanging their debentures for the claims and the balance in shares or debenture of the company; preference shareholders giving up their rights to arrears of debenture of the company; preference shareholders giving up their rights to arrears of the dividends, further agreeing to accept a reduces rate of dividend in the future,

As a creditor (lender), between bondholder and stockholder, bondholder have the priority to receive the rendered in advance of stockholders but they have secure creditor when the company is facing bankruptcy. The significant difference between bonds and stock is bonds normally have a defined term, will redeemed after maturity date, however stocks can last long for many year until the company have opposed to liquidation.

Miller and Modigliani’s second proposition focuses on the risks associated when a firm takes on more debt. “The expected yield of a share of stock is equal to the appropriate capitalization rate pk for a pure equity steam in the class, plus a