Siam
Sindhorn
Co.,
Ltd.
Applied
Financial
Engineering

The
logic
behind
the
original
deal

To
be
achieved
through
the
deal:

‐ Clean‐up
the
crossholding
structure
because
of
up‐coming
IPO
(dispose
of
6%
L&H
shares)
‐ Minimize
capital
gain
tax
on
stock
sale:
new
BHV
based
in
BriOsh
Virgin
Islands
will
issue
bonds
and
sell
them
at
the
book
value
‐ AQract
foreign
investors
‐ Receive
ﬁnancing
for
company’s
acOviOes

09/11/2011

8

Advantages
for
the
shareholders:

‐ Minimizing
bankruptcy
costs
‐
in
case
of
ﬁnancial
distress
exchanging
bonds
to
exchange
property
may
stave
oﬀ
bankruptcy
(this
is
the
special
feature
of
exchangeable
bonds,
converOble
bonds
do
not
bear
this
advantage)
Dispose
of
the
*…show more content…*

olaOlity
of
Share
Price
$17.233
(436Baht/25.3)
$17.233
(assumed
to
be
the
same
as
the
current
share
price)
5
years
6.3%
1.9%
(We
assume
that
it
should
be
less
than
coupon,
further
we
found
out
that
market
dividend
yield
at
SET
in
1994
was
1.86%
*)
25%
(the
last
available
volaOlity)

1
opHon
=
$4.887
Value
in
1
bond
=
$4.887*598.26
shares
=
$2923.7

*
hQp://www.set.or.th/en/market/tri.html

09/11/2011

Warrants

Black‐Scholes
formula

Variables

Current
Share
Price
Exercise
Price
Time
to
expiry
Risk
Free
Rate
Expected
Dividend
Yield
On
Share

$17.233
(436Baht/25.3)
$15.59
(422.92Baht/27.2{average
exchange
rate
for
1995,1996,1996
esOmated
})
3
years
6.3%
1.9%
(We
assume
that
it
should
be
less
than
coupon,
further
we
found
out
that
market
dividend
yield
at
SET
in
1994
was
1.86%
*)

Expected
VolaOlity
of
Share
Price
30.5%
(average
of
esOmaOons
of
1995
and
1997
volaOlity)
1
warrant
=
$5.007
Value
in
1
bond
=
290*$5.007=
$1452.03
*
hQp://www.set.or.th/en/market/tri.html

09/11/2011

The
binomial
method
of
opOon
valuaOon

2005
2006
545
436
82
98,8
327
0
2007
681
245
409
0
245
∆1
(upper
state)=(245‐0)/(681‐409)
=0,9
Borrow
PV
2006
=
368
OpOon
value
in
U
=
98,8
∆2
(iniOal
amount)=(98,8‐0)/(545‐327)=0,453
Borrow
PV
2005
=
148
PV
of
the
opOon
=
(0,453*436)‐(148/1,063)=82

Value
of
an
opHon
in
US$
=
82/25,3=$3,23

AssumpHons:

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