《财务管理》（英文版） 5.ppt

Chapter 20 Long-Term Debt, Preferred Stock, and Common Stock Long-Term Debt, Preferred Stock, and Common Stock Bonds and Their Features Types of Long-Term Debt Instruments Retirement of Bonds Preferred Stock and Its Features Rights of Common Shareholders Dual-Class Common Stock Bonds and Their Features Basic Terms Par Value Coupon Rate Maturity Bond Ratings Trustee and Indenture Types of Long-Term Debt Instruments Investors look to the earning power of the firm as their primary security. Investors receive some protection by the restrictions imposed in the bond indenture, particularly any negative-pledge clause. A negative-pledge clause precludes the corporation from pledging any of its assets (not already pledged) to other creditors. Types of Long-Term Debt Instruments In this case, subordinated debenture holders rank behind debenture holders but ahead of preferred and common stockholders in the event of liquidation. Frequently, the security is convertible into common stock to lower the yield required by subordinated debenture holders (often less than regular debentures). Types of Long-Term Debt Instruments Frequently, there is a cumulative feature, which provides that any unpaid interest in a particular year accumulates. The cumulative obligation is usually limited to no more than three years. The bonds are unpopular with investors (usually limited to reorganizations), but are still senior to preferred and common shareholders in the event of liquidation. Types of Long-Term Debt Instruments These are bonds with a rating of Ba (Moodys) or lower. Principal investors are pension funds, high-yield bond mutual funds, and some individual investors. Liquidity varies depending on investor sentiments. Junk bonds were used frequently in the 1980s as a means of financing leveraged buyouts (LBOs). Types of Long-Term Debt Instruments The issue is secured by a lien on specific assets of the corporation. The market value of the collateral should exceed the amount of the b