- Any positive covenants. Also, discuss several possible positive covenants Tuxedo Air might consider. - Any negative covenants. Also, discuss several possible negative covenants Tuxedo Air might consider. - A conversion feature (note that Tuxedo Air is not a publicly traded company). - A floating rate coupon. (Ross, et al., 2016). Therefore, Suzanne and Ed must look at the advantages and disadvantages of these bond features to find out the one that yield the highest return. However, they must examine them very
3 MINI-CASE ANALYSIS #2 carefully to get the best options since the decision can include one or more of these bond features. Evaluate and compare the alternative solutions When organizations get the benefits, the bond will have a higher coupon rate. On the other hand, the bond will have a lower coupon rate if the bondholders benefit . “Coupon rate is the rate of interest paid by bond issuers on the bond’s face value. It is the periodic rate of interest paid by bond issuers to its purchasers. The coupon rate is calculated on the bond’s face value (or par value), not on the issue price or market value” (Definition of 'Coupon Rate', n.d.). Therefore, it is essential to look at the advantages and disadvantages of each features deeply to get the best option. In this case, we have to address the security of the bond because there are advantages and disadvantages to secured bonds. Therefore, having a secured bond will be an advantage for Tuxedo Air since they will be paying lower coupon rate. If the bond has collateral, the coupon rate can be lower than unsecured bond. Collateral offers an asset that bondholders can claim that lowers their risk in non-payment. However, the assets that are placed as collateral must be held by the company in order to maintain its value (Ross, et al., 2016). The seniority of the bond is important because the bond has a lower coupon rate when the loan is older. One of the advantages of the senior bond is that it gets full payment in case of bankruptcy. However, a potential problem may arise when the bond contract limits the company
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