Siam Sindhorn Essay

1580 Words Feb 1st, 2011 7 Pages
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:
Open Document