The board of directors(BOD) of the Symantec Corporation inquired a consultant for an independent perspective on an essential financing decision. Symantec had been working along with numerous investment banks on a plan to raise 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 discussed 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. After reviewing the proposal, the consultant attempted to understand the motivation behind the structure of the trade. Why would Symantec select to issue bonds that are convertible, and would it mean to buy the call spread?
Symantec Corporation Convertible Notes With Call Spread a 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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