长期负债课件

Chapter20Long-TermDebt20.1LongTermDebt:AReview20.2ThePublicIssueofBonds20.3BondRefunding20.4BondRatings20.5SomeDifferentTypesofBonds20.6DirectPlacementComparedtoPublicIssues20.7Long-TermSyndicatedBankLoans20.8SummaryandConclusionsChapter20Long-TermDebt20.120.1LongTermDebt:AReviewCorporatedebtcanbeshort-term(maturitylessthanoneyear)orlong-term.Differentfromcommonstock:Creditor’sclaimoncorporationisspecifiedPromisedcashflowsMostarecallableOverhalfofoutstandingbondsareownedbylifeinsurancecompanies&pensionfundsPlainvanillabondsto“kitchensink”bonds20.1LongTermDebt:AReviewCFeaturesofaTypicalBondTheindentureusuallylistsAmountofIssue,DateofIssue,MaturityDenomination(Parvalue)AnnualCoupon,DatesofCouponPaymentsSecuritySinkingFundsCallProvisionsCovenantsFeaturesthatmaychangeovertimeRatingYield-to-MaturityMarketpriceFeaturesofaTypicalBondTheFeaturesofaHypotheticalBondFeaturesofaHypotheticalBon20.2ThePublicIssueofBondsThegeneralprocedureissimilartotheissuanceofstock,asdescribedinthepreviouschapter.Indenturesandcovenantsarenotrelevanttostockissuance.Theindentureisawrittenagreementbetweentheborrowerandatrustcompany.TheindentureusuallylistsAmountofIssue,DateofIssue,MaturityDenomination(Parvalue)AnnualCoupon,DatesofCouponPaymentsSecuritySinkingFundsCallProvisionsCovenants20.2ThePublicIssueofBondsPrincipalRepaymentTermbondsversusserialbondsSinkingfunds--howdotheywork?FractionalrepaymenteachyearGoodnews--securityBadnews--unfavorablecallsHowtrusteeredeemsPrincipalRepaymentTermbondsProtectiveCovenantsAgreementstoprotectbondholdersNegativecovenant:Thoushaltnot:paydividendsbeyondspecifiedamountsellmoreseniordebt&amountofnewdebtislimitedrefundexistingbondissuewithnewbondspayinglowerinterestratebuyanothercompany’sbondsPositivecovenant:Thoushalt:useproceedsfromsaleofassetsforotherassetsallowredemptionineventofmergerorspinoffmaintaingoodconditionofassetsprovideauditedfinancialinformationProtectiveCovenantsAgreementsTheSinkingFundTherearemanydifferentkindsofsinking-fundarrangements:Moststartbetween5and10yearsafterinitialissuance.Someestablishequalpaymentsoverthelifeofthebond.Mosthigh-qualitybondissuesestablishpaymentstothesinkingfundthatarenotsufficienttoredeemtheentireissue.Sinkingfunsprovideextraprotectiontobondholders.Sinkingfunsprovidethefirmwithanoption.TheSinkingFundTherearemany20.3BondRefundingReplacingallorpartofabondissueiscalledrefunding.Bondrefundingraisestwoquestions:Shouldfirmsissuecallablebonds?Giventhatcallablebondshavebeenissued,whenshouldthebondsbecalled?20.3BondRefundingReplacingaCallableBondsversusNoncallableBondsMostbondsarecallable;somesensiblereasonsforcallprovisionsinclude:taxes,managerialflexibilityandthefactthatcallablebondshavelessinterestraterisk.CallableBondsversusNoncalla20.4BondRatingsWhatisrated:Thelikelihoodthatthefirmwilldefault.Theprotectionaffordedbytheloancontractintheeventofdefault.Whopaysforratings:Firmspaytohavetheirbondsrated.Theratingsareconstructedfromthefinancialstatementssuppliedbythefirm.Ratingscanchange.Raterscandisagree.20.4BondRatingsWhatisratedBondRatings:InvestmentGradeBondRatings:InvestmentGradeBondRatings:BelowInvestmentGradeBondRatings:BelowInvestmentJunkbondsAnythinglessthananS&P“BB”oraMoody’s“Ba”isajunkbond.Apoliteeuphemismforjunkishigh-yieldbond.Therearetwotypesofjunkbonds:Originalissuejunk—possiblynotratedFallenangels—ratedCurrentstatusofjunkbondmarketPrivateplacementYieldpremiumsversusdefaultriskJunkbondsAnythinglessthana20.5DifferentTypesofBondsCallableBondsPuttableBondsConvertibleBondsDeepDiscountBondsIncomeBondsFloating-RateBonds20.5DifferentTypesofBondsCPuttablebondsPutprovisionsPutpricePutdatePutdefermentExtendiblebondsValueoftheputfeatureCostoftheputfeaturePuttablebondsPutprovisionsConvertibleBondsWhyaretheyissued?Whyaretheypurchased?Conversionratio:NumberofsharesofstockacquiredbyconversionConversionprice:Bondparvalue/ConversionratioConversionvalue:PricepershareofstockxConversionratioIn-the-moneyversusout-the-moneyConvertibleBondsWhyaretheyConvertibleBondPricesConvertibleBondPricesExampleofaConvertibleBondExampleofaConvertibleBondMoreonConvertiblesExchangeablebondsConvertibleintoasetnumberofsharesofathirdcompany’scommonstock.Minimum(floor)valueofconvertibleisthegreaterof:Straightor“intrinsic”bondvalueConversionvalueConversionoptionvalueBondholderspayfortheconversionoptionbyacceptingalowercouponrateonconvertiblebondsversusotherwise-identicalnonconvertiblebonds.MoreonConvertiblesExchangeabExampleofanExchangeableBondExampleofanExchangeableBon20.6DirectPlacementComparedtoPublicIssuesAdirectlong-termloanavoidsthecostofregistrationwiththeSEC.Directplacementislikelytohavemorerestrictivecovenants.Intheeventofdefault,itiseasierto“workout”aprivateplacement.20.6DirectPlacementCompared20.7Long-TermSyndicatedBankLoans20.7Long-TermSyndicatedBank20.8SummaryandConclusionsThedetailsofthelong-termdebtcontractarecontainedintheindenture.Themainprovisionsare:security,repayment,protectivecovenantsandcallprovisions.Protectivecovenantsaredesignedtoprotectbondholdersfrommanagementdecisionsthatfavorstockholdersatbondholders’expense.Mostpublicindustrialbondsareunsecured—theyaregeneralclaimsonthecompany’svalue.Mostutilitybondsaresecured.Ifthefirmdefaultsonsecuredbonds,thetrusteecanrepossesstheasset.20.8SummaryandConclusionsTh20.8SummaryandConclusions(cont.)Long-termbondsusuallyprovideforrepaymentofprincipalbeforematurity.Thisisusuallyaccomplishedwithasinkingfundwherebyafirmretiresacertainnumberofbondseachyear.Mostpubliclyissuedbondsarecallable.Thereisnosinglereasonforcallprovisions.Somesensiblereasonsincludetaxes,greaterflexibility,andthefactthatcallablebondsarelesssensitivetointerest-ratechanges.Therearemanydifferenttypesofbonds,includingfloating-ratebonds,deep-discountbonds,andincomebonds.20.8SummaryandConclusions(Chapter20Long-TermDebt20.1LongTermDebt:AReview20.2ThePublicIssueofBonds20.3BondRefunding20.4BondRatings20.5SomeDifferentTypesofBonds20.6DirectPlacementComparedtoPublicIssues20.7Long-TermSyndicatedBankLoans20.8SummaryandConclusionsChapter20Long-TermDebt20.120.1LongTermDebt:AReviewCorporatedebtcanbeshort-term(maturitylessthanoneyear)orlong-term.Differentfromcommonstock:Creditor’sclaimoncorporationisspecifiedPromisedcashflowsMostarecallableOverhalfofoutstandingbondsareownedbylifeinsurancecompanies&pensionfundsPlainvanillabondsto“kitchensink”bonds20.1LongTermDebt:AReviewCFeaturesofaTypicalBondTheindentureusuallylistsAmountofIssue,DateofIssue,MaturityDenomination(Parvalue)AnnualCoupon,DatesofCouponPaymentsSecuritySinkingFundsCallProvisionsCovenantsFeaturesthatmaychangeovertimeRatingYield-to-MaturityMarketpriceFeaturesofaTypicalBondTheFeaturesofaHypotheticalBondFeaturesofaHypotheticalBon20.2ThePublicIssueofBondsThegeneralprocedureissimilartotheissuanceofstock,asdescribedinthepreviouschapter.Indenturesandcovenantsarenotrelevanttostockissuance.Theindentureisawrittenagreementbetweentheborrowerandatrustcompany.TheindentureusuallylistsAmountofIssue,DateofIssue,MaturityDenomination(Parvalue)AnnualCoupon,DatesofCouponPaymentsSecuritySinkingFundsCallProvisionsCovenants20.2ThePublicIssueofBondsPrincipalRepaymentTermbondsversusserialbondsSinkingfunds--howdotheywork?FractionalrepaymenteachyearGoodnews--securityBadnews--unfavorablecallsHowtrusteeredeemsPrincipalRepaymentTermbondsProtectiveCovenantsAgreementstoprotectbondholdersNegativecovenant:Thoushaltnot:paydividendsbeyondspecifiedamountsellmoreseniordebt&amountofnewdebtislimitedrefundexistingbondissuewithnewbondspayinglowerinterestratebuyanothercompany’sbondsPositivecovenant:Thoushalt:useproceedsfromsaleofassetsforotherassetsallowredemptionineventofmergerorspinoffmaintaingoodconditionofassetsprovideauditedfinancialinformationProtectiveCovenantsAgreementsTheSinkingFundTherearemanydifferentkindsofsinking-fundarrangements:Moststartbetween5and10yearsafterinitialissuance.Someestablishequalpaymentsoverthelifeofthebond.Mosthigh-qualitybondissuesestablishpaymentstothesinkingfundthatarenotsufficienttoredeemtheentireissue.Sinkingfunsprovideextraprotectiontobondholders.Sinkingfunsprovidethefirmwithanoption.TheSinkingFundTherearemany20.3BondRefundingReplacingallorpartofabondissueiscalledrefunding.Bondrefundingraisestwoquestions:Shouldfirmsissuecallablebonds?Giventhatcallablebondshavebeenissued,whenshouldthebondsbecalled?20.3BondRefundingReplacingaCallableBondsversusNoncallableBondsMostbondsarecallable;somesensiblereasonsforcallprovisionsinclude:taxes,managerialflexibilityandthefactthatcallablebondshavelessinterestraterisk.CallableBondsversusNoncalla20.4BondRatingsWhatisrated:Thelikelihoodthatthefirmwilldefault.Theprotectionaffordedbytheloancontractintheeventofdefault.Whopaysforratings:Firmspaytohavetheirbondsrated.Theratingsareconstructedfromthefinancialstatementssuppliedbythefirm.Ratingscanchange.Raterscandisagree.20.4BondRatingsWhatisratedBondRatings:InvestmentGradeBondRatings:InvestmentGradeBondRatings:BelowInvestmentGradeBondRatings:BelowInvestmentJunkbondsAnythinglessthananS&P“BB”oraMoody’s“Ba”isajunkbond.Apoliteeuphemismforjunkishigh-yieldbond.Therearetwotypesofjunkbonds:Originalissuejunk—possiblynotratedFallenangels—ratedCurrentstatusofjunkbondmarketPrivateplacementYieldpremiumsversusdefaultriskJunkbondsAnythinglessthana20.5DifferentTypesofBondsCallableBondsPuttableBondsConvertibleBondsDeepDiscountBondsIncomeBondsFloating-RateBonds20.5DifferentTypesofBondsCPuttablebondsPutprovisionsPutpricePutdatePutdefermentExtendiblebondsValueoftheputfeatureCostoftheputfeaturePuttablebondsPutprovisionsConvertibleBondsWhyaretheyissued?Whyaretheypurchased?Conversionratio:NumberofsharesofstockacquiredbyconversionConversionprice:Bondparvalue/ConversionratioConversionvalue:PricepershareofstockxConversionratioIn-the-moneyversusout-the-moneyConvertibleBondsWhyaretheyConvertibleBondPricesConvertibleBondPricesExampleofaConvertibleBondExampleofaConvertibleBondMoreonConvertiblesExchangeablebondsConvertibleintoasetnumberofsharesofathirdcompany’scommonstock.Minimum(floor)valueofconvertibleisthegreaterof:Straightor“intrinsic”bondvalueConversionvalueConversionoptionvalueBondholderspayfortheconversionoptionbyacceptingalowercouponrateonconvertiblebondsversusotherwise-identicalnonconvertiblebonds.MoreonConvertiblesExchangeabExampleofanExchangeableBondExampleofanExchangeableBon20.6DirectPlacementComparedtoPublicIssuesAdirectlong-termloanavoidsthecostofregistrationwiththeSEC.Directplacementislikelyto