FINA861 Corporate Financial Management

This case study is designed to analyse the debt financing of a listed company. You are expected to write a report of no more than 2 pages that will address the issues below:


Instructions:

· Pick the same company as you did for the Case study 1 (THE SYNLAIT MILK .LTD) and make sure the company has issued corporate bond in the last 3 years that is listed on NZX.  If the company  has not issued any debt in the last 3 years ,please expert to choose a different NZX listed company. From the chosen company pick the most recent bond to answer the following questions.

· Provide the details of the bond, type of instrument (coupon paying bond, convertible debt etc.), price, fixed or floating interest rate? Current price, frequency of coupon, term to maturity, yield (YTM) etc.

· Comment on the stated purpose of issuing the bond (you will have to read the bond prospectus or company’s annual report) and calculate what proportion of the total existing debt of the company does this particular bond issuance comprise of. Calculate the debt to equity ratio (D/E) of the company and discuss whether the D/E ratio is comparable (if not why?) to those of the peer companies you have used in the equity valuation (Case study) exercise.

· Evaluate and discuss whether the cost of debt capital associated with this bond issuance is higher or lower compared to the company’s existing WACC. For insight on calculating debt cost of capital read Chapter 12 of the assigned textbook.

Evaluation criteria:

Your marks for this case study will be based on:

· How well you analyse, interpret and present the questions.

· How you justify the narrative with the numbers.

· How does your discussion justify alternative interpretation/hypothesis of the findings.