Belgacom case study

Before Apple Inc. decides to issue bonds in Switzerland, its’ management team has to take a few issues and factors into consideration before authorizing SFr1.25bn worth of debt to be put in the company’s books.

General Motors, at one point the largest car manufacturer in the world, needed a bailout in 2009 to stay in business. One of the main reason the auto giant filed for bankruptcy was seen on the balance sheet where assets were $82.2 billion and a vast amount of liabilities that equated to a whopping $172 billion. With this massive amount of debt hanging over the company, General Motors according to the Economist, “the chief financial officer sought to raise $3 billion through a sale of bonds or shares,”(Economist Editor). After Lehman Brothers had fallen GM knew that they would not be able to get the funds, so they tried to sell non-core assets,(Economist Editor). At this point, the stock price for General Motors fell to $3, (Economist Editor).

Corporate Bonds are the financial instruments through which corporates can raise capital by borrowing money from investors. In return company pays interest on the principal. And the principal is returned to the lender after pre-determine period also called as maturity. It is more cost effective to raise money through bonds than through equity. Even if the company is going through a difficult financial crisis, it still has a legal commitment to pay interest and principal to lenders. Bond investors have priority over shareholders on the company’s properties in case of bankruptcy. Companies issue bonds for a variety of purposes, including buying new assets, investing in research and development, refinancing debt, or financing mergers and acquisitions.

Three financing alternatives are suitable for the company (Hillier, D., Grinblatt, M., & Titman, S. (2011) They include a five-year yen/dollar dual, a five-year Euroyen bond, and a five-year Eurodollar bond. The viability of these alternatives will be assessed in the context of maturity concerns, whether the billion dollar piece have a floating rate or a fixed rate and finally whether the final dollar piece should be issued in US dollars or other currencies.

The equity market, although heavily depressed since 2007, provided a much needed safety valve to shift financing away from debt to equity, especially considering the underdeveloped

Net sales for the month ended December 31, 2016 rose 8.5% to $570k from $526k in December 2015. Bimba comprised 71.9% of net sales in December 2016 versus 70.3% of net sales in December 2015. Sales to S&S Cycle, McMaster, and D&N Bending exceeded prior year by $37k collectively. Returning customer Concentric added $6.5k in sales during the month.

This case raises many interesting questions concerning the record setting issuance of corporate debt by WorldCom, Inc. (“WorldCom”). Both the surprisingly voluminous structure of the proposed issuance and the foreboding macro-economic climate in which it was slated spark concerns over the risk and cost of the move. One of the first questions that must be addressed is whether WorldCom’s timing was appropriate. Next, the company’s choice of structure for the bond issuance must be analyzed. Finally, the cost of issuing each tranche of debt must be estimated in order to determine how much WorldCom is actually giving up to achieve the $6 billion in funds.

Item *P14-12 *P14-13 *P14-14 Description Debtor/creditor entries for continuation of troubled debt. Restructure of note under different circumstances. Debtor/creditor entries for continuation of troubled debt with new effective-interest. Bond theory: balance sheet presentations, interest rate, premium. Various long-term liability conceptual issues. Bond theory: price, presentation, and retirement. Bond theory: amortization and gain or loss recognition. Off-balance-sheet financing. Bond issue, ethics Level of Difficulty Moderate Moderate Complex Time (minutes) 15–25 30–45 40–50

They should go after Rule 144ª bonds to fund the debt, since it has the share advantages of public bonds and has the additional advantage of speed, they also don’t require initial disclosure to the SEC and only qualified institutional investors could buy 144A bonds wich makes it a safer option.

The Funding methodology opted for was Leverage Buy-Out. The sources of debt are as follows:

As we know, the returns offered to creditors are fixed but the returns to stockholders are variable. In this case, RJR was acquired by KKR, the debt of RJR increased from 38% of total capital to nearly 90% of total capital. This will decrease nearly 20% of the value of RJR’s bonds. The owner try to get the hope of receiving better returns through increase the risk of the company’s investments. So that, stockholders be influenced when this happen. The reason is that they don’t have chance to share in these higher returns. Because of this loss of value, Metropolitan Life Insurance Company and other large stockholders sued RJR for violating the rights of stockholder and protections under the bond covenants. Ultimately, they settled the suit due to the benefit of Metropolitan. Stockholders cannot resist this transaction even through this decision may have high risk.

The period 1951–1961 was intense and MS was involved in the management of the famous World Bank 's US$50 million triple-A-rated bonds offering of 1952. It also dealt with the General Motor 's US$300 million debt issue, US$231 million IBM stock offering, and the US$250 million AT&T 's debt offering (MS, report 2008).

To obtain the last $5 million needed to complete the financing package we are recommending that Tirshrup work at obtaining a Yankee bond. We feel the lower amount will increase their odds of obtaining one plus it would help to position them in the United States market and help them gain the name recognition and the visibility needed. Yankee bonds can help issuers take advantage of relatively favorable regulatory and lending conditions in the U.S. as well as the large bond market. Plus investors like Yankee bonds because they offer geographic and currency diversification as well as some tax advantages. (Yankee Bonds)

The deal is seen as a major endorsement of Australia 's corporate bond market, which has at times struggled to lure the world 's largest companies

Leveraged buyouts (LBOs) involve use of a large amount of debt to purchase a firm. LBOs are generally used to finance management buyouts. LBOs are a clear-cut example of a financial merger undertaken to create a high-debt private corporation with improved cash flow and value. Typically, in an LBO, 90 percent or more of the purchase price is financed with debt. A large part of the borrowing is secured by the acquired firm’s assets, and the lenders, because of high risk, take a portion of the firm’s equity. Junk bonds have been routinely used to raise the large amounts of debt needed to finance LBO