To offer an incentive to investors such as the

funds. To offer an incentive to investors such as the companies assets as collateral, this offer risk to
company as there’s potential they will loose partial ownership of assets, but this does come with benefits
such as potential to offer lower coupon rate, this is a win for both Tuxedo Air and investors as they have
peace of mind knowing if something happens to the company they can still obtain some of the companies
assets.
Recommendation:
There are advantages and disadvantage offering bond for capital to help financial operations as there
are risk as cover, the security of the bond—that is, whether the bond has collateral. the seniority of the
bond, the presence of a sinking fund. A call provision with specified call dates and call prices. A deferred
call accompanying the call provision, a Canada plus call provision. Any positive covenants. Also, discuss

Mini Case Analysis 2 6
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), and the floating-rate coupon. The advantages for companies who
use bonds to raise capital for financial operations outweighs the disadvantage, as companies need to
expand and grow thus, issuing bonds can help Tuxedo Air achieve their goals. By offering their assets as
collateral they can have a low coupon rate, by putting their assets on the line. If Tuxedo Air decide to
move into the public traded market they can consider convertible bonds, these can be converted into a
predetermined amount of the underlying company's equity at certain times during the bond's life, usually
at the discretion of the bondholder . Convertible bonds are a flexible financing option for companies and
are particularly useful for companies with high risk/reward profiles.
Reference:

Mini Case Analysis 2 7
Ismailidou, E. (2016). Companies are having the hardest time selling their bonds in a decade. [online]
MarketWatch. Available at: -
companies-to-tap-in-a-decade-2016-02-25 [Accessed 7 Jan. 2019].
Ross, S. A., Westerfield, R., Jordan, B. D., & Roberts, G. S. (2016). Fundamentals of corporate
finance (9th Canadian ed.). Whitby, Canada: McGraw-Hill Ryerson.
Sharper Insight. Smarter Investing. (n.d.). Retrieved from