Feed Resource Recovery: Case Summary

Under the circumstance of an IPO, tranches C, D and E will convert to common at their negotiated prices while A & B will be redeemed.

When the debt instrument and the option to acquire common stock are inseparable, as in the case of convertible bonds, the entire proceeds of the bond issue are allocated to the debt and the related premium or discount accounts.

As for the combination of cash and new shares, shareholders can take part of their money

* b.  Further allocation of amounts allocated to repurchased shares to various components of stockholder equity upon formal or constructive retirement.

Star Corporation issued both common and preferred stock during 20X6. The stockholders' equity sections of the company's balance sheets at the end of 20X6 and 20X5 follow.

= Par value of preferred shares issued / Par value per share of preferred shares

California Surf Clothing Company issues 1,300 shares of $7 par value common stock at $22 per share. Later in the year, the company decides to repurchase 130 shares at a cost of $35 per share.

Dividends should be made cumulative and issuable upon a liquidation event or an IPO. Such dividends may be converted, if the holder desires, to common shares. This will encourage management to seek a quicker exit.

There are two main characteristics of the Series B Preferred Stock that behave like equity- the voting rights and conversion option. The host contract gives voting rights- which behave like equity. While voting rights fall into the equity category, these are not full voting rights. The voting rights allow the Series B preferred stockholders to vote with common stockholders only for significant events. These voting rights are therefore not full voting rights which means this characteristic is not given its full weight as being toward equity. The conversion option shows signs of equity; however, it also shows signs of debt. Since the conversion option is weighted equally for equity and debt, it essentially cancels itself in determining whether the host contract is debt or equity.

The case is set in the context of RJR’s 1985 financing of its $4.9 billion acquisition of Nabisco Brands Inc. To finance the acquisition, RJR was proposing the issue of $1.2 billion of 12 year notes and the same amount in preferred stock. It had already funded $1.5 billion of the acquisition leaving $1 billion more to finance.

in the proposed term sheet.  Compare the term sheet to M-Y: what type of security (CP, RP,

It has the option to distribute the cash in the form of dividends. Shareholders were taxed on cash dividends at ordinary income rates whereas gains realized on shares that were repurchased received capital gains treatment.

Preferred stock is the stock that provides for preferential treatment of dividends. Preferred stock holders receive dividends before common stockholders (Glandon, 2010). Preferred stockholders typically receive a set amount of dividends per year. If a company is operating at a high profit, preferred stock holders receive less in dividends than a common stock holder. If a company is not operating at a high rate, the preferred stock holders will receive a higher return than the common stockholders.

Summit Partners proposes to FleetCor Technologies (later preferred as “FleetCor” or the “Company”) an investment into FleetCor for the total amount of $44.9 million in return for a post transaction ownership of 54.2% in the “Company” and coming down to 46% ownership in the company after newly created stock options for management equivalent to 15% ownership in the company has been completely executed and fully diluted. This investment is in the form of convertible preferred stock with an 8% accrued interest, compounding annually. As the transaction come through, Summit’s prefer stock will be treated equal-footing in

Before going to redeem the preference shares as per section 80 of the Companies Act, 1956, a company should have to follow the conditions: i) There must be a provision in the Articles of Association regarding the redemption of preference shares. ii) The redeemable preference shares must be fully paid up. If there is any partly paid share, it should be converted in to fully paid shares before redemption. iii) The redeemable preference shareholders should be paid out of undistributed profit/ distributable profit or out of fresh issue of shares for the purpose of redemption. iv) If the shares are redeemed at a premium, it should be should be provided out of securities premium or profit and loss account or general reserve account. v) The proceeds from fresh issue of debentures cannot be utilized for redemption. vi) The amount of capital reserve cannot be used for redemption of preference shares. vii) If the shares are redeemed out of undistributed profit , the nominal value of share capital, so redeemed should be transferred to Capital Redemption Reserve Account. This is also known as capitalization profit.