How cost feature would affect the coupon rate

Reference no: EM131262913

QUESTION 1

Name two (2) leading bond-rating agencies in Malaysia and list down the credit rating used by these 2 agencies on the overall capacity of an entity to meets its financial obligation (please refer page 233 for example).

QUESTION 2

Answer all question in Minicase page 260 (Financing S&S Air's Expansion Plans with a Bond Issue).

Mark Sexton and Todd Story, the owner of S&S air, have decided to expand their operations. They instructed their newly hired financial analyst, Chris Guthrie, to enlist an underwriter to help sell $35 million in new 10-year bond to finance construction. Chris have entered into discussion with Kim McKenzie, an underwriter from the firm of Raines and Warren, about which bond features S&S Air should consider and what coupon rate the issue will likely have.

QUESTIONS:

1. The security of the bond-that is, whether the bond is collateral.

2. The security of the bond.

3. The presence of a sinking fund.

4. A call provision with specified call dates and call prices.

5. A deferred call accompanying the call provision.

6. A make-whole call provision.

7. Any positive covenants. Also discuss several possible positive covenants S&S Air might consider.

8. Any negative covenants. Also discuss several possible negative covenants S&S Air might consider.

9. A conversion feature (note that S&S Air is a publicly traded company).

10. A floating-rate coupon.

Reference no: EM131262913

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Reviews

len1262913

11/2/2016 3:34:00 AM

Although Chris is aware of the bong features, he is uncertain about the cosst and benefits of some features, so he isn't sure how cost feature would affect the coupon rate of the bond issue. You are Kim's assistant, and she asked you to prepare a memo to Chris describing the effect of each of the following bond features on the coupon rate of the bon. She would also like you list advantage and disadvantages of each feature: QUESTIONS: 1. The security of the bond-that is, whether the bond is collateral. 2. The security of the bond. 3. The presence of a sinking fund. 4. A call provision with specified call dates and call prices. 5. A deferred call accompanying the call provision. 6. A make-whole call provision. 7. Any positive covenants. Also discuss several possible positive covenants S&S Air might consider. 8. Any negative covenants. Also discuss several possible negative covenants S&S Air might consider. 9. A conversion feature (note that S&S Air is a publicly traded company). 10. A floating-rate coupon.

len1262913

11/2/2016 3:33:46 AM

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