source_of_financing课件.pptVIP

1 Forms of quasi-equity financing Unsecured loan from sponsor, third party and government of developing countries Convertible bond Warrant bond-Bond with attached warrant Zero-coupon bond Loan guarantee 5.4 Financing Quasi-Equity Globally 1 In finance, a convertible bond is a type of bond that can be converted into shares of stock in the issuing company or cash of equal value, at some pre-announced ratio. It is a hybrid security with debt- and equity-like features. Although it typically has a low coupon rate, the holder is compensated with the ability to convert the bond to common stock at an agreed upon price and thereby participate in further growth in the companys equity value. 5.4 Financing Quasi-Equity Globally convertible bond 1 Benefit and disadvantage of convertible bond From the issuer’s perspective, the key benefit of raising money by selling convertible bonds is a reduced cash interest payment. However, in exchange for the benefit of reduced interest payments, the value of shareholder’s equity is reduced due to the stock dilution(股份稀释) expected when bondholders convert their bonds into new shares. 5.4 Financing Quasi-Equity Globally 1 Warrant bond-Bond with attached warrant Definition: Equity warrant bonds are debt securities that incorporate warrants, which give the holder the option to purchase equity in the issuer, its parent company, or another company during a predetermined period or on one particular date at a fixed contract price. Definition: A bond with option rights is called a warrant bond. For a limited time, it confers the right to buy equity securities, such as shares, of the bond issuer at a predetermined price (exercise price). 5.4 Financing Quasi-Equity Globally 1 Context:The warrants are detachable and may be traded separately from the debt security. The exercise of the equity warrant will normally increase the total capital funds of the issuer because the debt is not replaced by equity but remains outstanding until the date of i