Corporate Finance

Kenyon Enterprises, Inc. (Kenyon) is a Delaw ar corporation engaged in the reconstruct and dispersion of recreational and camping equipment. Kenyon has outstanding near $four hundred zillion principal sum tally of convertible debentures (the unbarred bonds) which were issued in early 2002 and mature in the year 2032. all(prenominal) debenture bond represents a debt in the amount of $1,000 which bears contact at the grade of 7% annually. The debenture bonds be publicly traded and wide held (no person holds more than 3% of the outstanding debentures). Kenyon solicitude regarded the 2002 matter of the unsecured bonds as well timed in notification to the interest rate environment. An attempt to issue the same example of debentures in the current climate, in which interest rates gravel go slightly higher, would likely require an interest rate of 7.5% or perhaps 8.0% to attract debt investors. Kenyons has 12 million portion outs of coarse stock outstanding which are traded on the New York entrepot Exchange. Kenyons trades have traded on fair(a) at close to $50 per make do during the last 12 months. Kenyons current merchandise capitalization (the aggregate judge of all outstanding greens voices at current per share market price) is thus nigh $600 million (i.e., $50 per share times 12 million shares = $600 million).

The shares of Kenyon reciprocal stock are also widely held. The largest stockholder is Kenyons founder and CEO, Kurt Kenyon, who owns approximately 7% of the outstanding shares. Kurt Kenyon owns no debenture bonds. The Debentures are convertible into Kenyon prevalent stock any time at the option of the Debenture holder at a rate of 15 shares of Kenyon hon! ey oil stock for each $1,000 Debenture. Thus to exercise the reincarnation option, the Debenture holder must surrender his or her Debentures to Kenyon and for each Debenture surrendered will receive 15 shares of Kenyon common stock. To date this changeover option has been out of the money. For example, at the recent $50 per share market...If you want to get a full essay, order it on our website: OrderEssay.net

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