The board of directors(BOD) of the Symantec Corporation inquired a consultant for a un-biased judgment on an essential financing pronouncement. Symantec had been functioning with numerous investment banks on a plan to accumulate debt to repurchase common shares.
The consultant established it to be an intriguing financing strategy; whereas repurchasing Symantec's financial leverage would be instantly increased by shares and would reduce leverage at a possibly substantial dilutive price to the company's equity. The corporation conversed with the investment banks to purchase a call spread on its own stock, covering exactly the same number of shares as would be issued to noteholders upon conversion. Subsequent to reviewing the proposal, the consultant attempted to understand the motivation behind the structure of the trade. Why would Symantec choose to issue bonds that are convertible, and would it mean to buy the call spread?
Symantec Corporation Convertible Notes With Call Spread case study solution
PUBLICATION DATE: September 19, 2012 PRODUCT #: W10025-HCB-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
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