After Dan's EFN analysis for East Coast Yachts (see the Closing Case in Chapter 3), Larissa has decided to expand the company's operations. She has asked Dan to enlist an underwriter to help sell $45 million in new 30-year bonds to finance new construction. Dan has entered into discussions with Renata Harper, an underwriter from the firm of Crowe & Mallard, about which bond features East Coast Yachts should consider and also what coupon rate the issue will likely have. Although Dan is aware of bond features, he is uncertain as to the costs and benefits of some of them, so he isn't clear on how each feature would affect the coupon rate of the bond issue.
advantages and disadvantages:
- security of bond
- seniority of bond
- presence of sinking fund
- call provision with specific dates and prices
- make whole call provision
- positive covenants (also possible positive covenants)
- negative covenants
- conversion feature (publicly traded company)
- floating rate coupon