Julian Eastheimer & Co
Case 2 - Financing Alternatives - Rationale
1) Boudior's Inc - Leasing Arrangement - they cannot use their real estate to acquire loan since it is already under mortage - same with inventory which is already under chattel mortgage - they can negotiate for a lease-to-own arrangement
"wikipedia"
These contracts are commonly used where a buyer wants to purchase a home, or building but due to credit issues would not qualify for a conventional mortgage and does not wish to, or would not qualify, for other financing. A lease-to-own purchase (also "rent-to-own purchase" or "lease purchase") is a lease combined with an option to purchase the property within a specified period, usually 3 years or less, at an agreed-upon price. The borrower pays an option fee, 1% to 5% of the price, which is credited to the purchase price. The borrower pays rent, and an additional rent premium that is also credited to the purchase price. If the purchase option is not exercised, the buyer loses both the option fee and the rent premium. 2) Timberland Power & Light - Long Term Bonds $900 m long term debt = 60% $75 m preferred stock = 5% $ 525 m common equity = 35% ttl current asset = $ 1.5b According to SEC, the holding company can have a long term debt fro 45% to 65% - adding 37m in debt by issuing long term bonds will result to $937 m long term debt = 61% $75 m preferred stock = 5% $ 525 m common equity = 34% - still within the acceptable range of SEC 3) Ripe and Fresh Canning Company - Factoring (Selling of the Firms Accounts Receivable) - Converting invoices to cash - instead of them having to collect cash after 60-day period, they can sell it to a factoring company at say 95% of the face value -Borrowing money, secured by your debt - their bank lends them the money,
1) Boudior's Inc - Leasing Arrangement - they cannot use their real estate to acquire loan since it is already under mortage - same with inventory which is already under chattel mortgage - they can negotiate for a lease-to-own arrangement
"wikipedia"
These contracts are commonly used where a buyer wants to purchase a home, or building but due to credit issues would not qualify for a conventional mortgage and does not wish to, or would not qualify, for other financing. A lease-to-own purchase (also "rent-to-own purchase" or "lease purchase") is a lease combined with an option to purchase the property within a specified period, usually 3 years or less, at an agreed-upon price. The borrower pays an option fee, 1% to 5% of the price, which is credited to the purchase price. The borrower pays rent, and an additional rent premium that is also credited to the purchase price. If the purchase option is not exercised, the buyer loses both the option fee and the rent premium. 2) Timberland Power & Light - Long Term Bonds $900 m long term debt = 60% $75 m preferred stock = 5% $ 525 m common equity = 35% ttl current asset = $ 1.5b According to SEC, the holding company can have a long term debt fro 45% to 65% - adding 37m in debt by issuing long term bonds will result to $937 m long term debt = 61% $75 m preferred stock = 5% $ 525 m common equity = 34% - still within the acceptable range of SEC 3) Ripe and Fresh Canning Company - Factoring (Selling of the Firms Accounts Receivable) - Converting invoices to cash - instead of them having to collect cash after 60-day period, they can sell it to a factoring company at say 95% of the face value -Borrowing money, secured by your debt - their bank lends them the money,