The cost of bond covenant restrictions on the disposition of assets
Smith and Warner's (1979) costly contracting hypothesis holds that financial contracts can help resolve conflicts between bondholders and stockholders. Two simple models are described for measuring the cost of bond covenant restrictions on firms with regard to the disposition of potentially substantial assets. The first model is based on OPM and useful when considering restrictions placed on the disposal of common stock holdings. The second model employs the discounted cashflow method and is helpful when addressing restrictions on the sale of depreciable assets.
Publication Name: Journal of Business Finance and Accounting
Global junk bond trailblazer
Federal-Mogul's unprecedented $1 billion three-tranche global junk bond offering has reached its targets of 200, 203, and 228 basis points despite a lack of support from the US market and negative press. The offering, implemented in June 1998 as part of the firm's global expansion and acquisition of T and N auto parts firm, was orchestrated by company vice president and treasurer David Bozynski. Bozynski had anticipated increased European demand for more overseas returns in preparation for the single currency.
Publication Name: Treasury & Risk Management
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