Stonewood is the second largest residential group home builder in Canterbury and the third largest nationally. The company went into receivership on February 22. On March 09, Inno Capital purchased Stonewood Homes and its assets, kept on the 40-strong workforce, and announce its plans to employ more staff and a Chief Executive Officer soon. As a Business Development Manager of Inno Capital, explain to new shareholders of Stonewood how agency conflicts might exist between owners of Inno Capital and the existing managers of Stonewood. Please also recommend ways and methods to encourage the managersâ goals to align with the goal of the new shareholders.
Following the purchase of Stonewood Homes and its assets, Inno Capital needs to raise fund amounting $100 million. The owners of Inno Capital are considering 2 options. For the first option, ANZ Bank is offering a term loan (long-term debt) of $100 million to be fully settled in 10 years at an interest rate of 2.0% above the bankâs Base Lending Rate (BLR). Presently, ANZâs BLR is 6.0% and the bank reviews its BLR every 6 months. For the second option, Inno Capital may issue a bond with a face value of $100 million, a coupon rate of 7.0% to be paid semi-annually, and a term to maturity of 10 years. The present market interest rate is considered at a low regime and is highly unlikely to go down further. In fact, you expect interest rate to rise gradually from this year over the next 10 years. As a Chief Financial Officer of Inno Capital, explain to the owners of Inno Capital the advantages and disadvantages of each of the two options above and provide your recommendations as to which option is better and why.
Stonewood is the second largest residential group home builder in Canterbury and the third largest nationally. The company went into receivership on February 22. On March 09, Inno Capital purchased Stonewood Homes and its assets, kept on the 40-strong workforce, and announce its plans to employ more staff and a Chief Executive Officer soon. As a Business Development Manager of Inno Capital, explain to new shareholders of Stonewood how agency conflicts might exist between owners of Inno Capital and the existing managers of Stonewood. Please also recommend ways and methods to encourage the managersâ goals to align with the goal of the new shareholders.
Following the purchase of Stonewood Homes and its assets, Inno Capital needs to raise fund amounting $100 million. The owners of Inno Capital are considering 2 options. For the first option, ANZ Bank is offering a term loan (long-term debt) of $100 million to be fully settled in 10 years at an interest rate of 2.0% above the bankâs Base Lending Rate (BLR). Presently, ANZâs BLR is 6.0% and the bank reviews its BLR every 6 months. For the second option, Inno Capital may issue a bond with a face value of $100 million, a coupon rate of 7.0% to be paid semi-annually, and a term to maturity of 10 years. The present market interest rate is considered at a low regime and is highly unlikely to go down further. In fact, you expect interest rate to rise gradually from this year over the next 10 years. As a Chief Financial Officer of Inno Capital, explain to the owners of Inno Capital the advantages and disadvantages of each of the two options above and provide your recommendations as to which option is better and why.
