Problem
A. What is the strategic rationale for Hastings acquiring a stake in Neo Performance Metals?
B. Is the purchase of the stake in Neo a 'good investment'? Justify your answer.
C. How do the terms around transferability affect the value of the exchangeable notes? Why is the Hastings guarantee on the exchangeable notes ranking 'behind any current or future debt obligations relating to the funding of the Yangibana project'? Why is the coupon 'payable in kind'?
D. How many Hastings shares will Wyloo acquire if it converts its exchangeable notes into shares (a) at the earliest possible time, (b) at the last possible date? Show all working. You should assume that BBSY remains at 2.45% over the term of the notes.
E. Use the data in the case to value the redemption option held by Hastings on a diluted basis. You should assume the redemption option has a three-year term.
F. Discuss the advantages and disadvantages of the exchangeable note funding mechanism from Hastings' perspective.