Siam Sindhorn
Siam
Sindhorn
Co.,
Ltd.
Applied
Financial
Engineering
The logic behind the original deal
To be achieved through the deal:
‐ Clean‐up the crossholding structure because of up‐coming IPO (dispose of 6% L&H shares) ‐ Minimize capital gain tax on stock sale: new BHV based in BriOsh Virgin Islands will issue bonds and sell them at the book value ‐ AQract foreign investors ‐ Receive financing for company’s acOviOes
09/11/2011
8
Advantages for the shareholders:
‐ Minimizing bankruptcy costs ‐ in case of financial distress exchanging bonds to exchange property may stave off bankruptcy (this is the special feature of exchangeable bonds, converOble bonds do not bear this advantage) Dispose of the shares without paying 30% capital gain tax Raising cheap debt ‐ company is able to offer the bond at a lower coupon rate ‐ less than it would have to pay on a straight bond Bondholders are not enOtled to vote => voOng control remains in the hands of the common stockholders Bond interest is a deducOble expense for the issuing company Delayed diluOon of common stock and earnings per share (EPS)
‐ ‐
‐ ‐ ‐
Main components of the deal (1)
Exchangeable Bonds QuanOty Face Value Coupon Maturity Bond Exchange Rate Exchange Property 9 000 $10 000 2% p.a. 31.7.2000 1 bond = 598.26 shares 5 384 355 shares of Land & Houses Warrants QuanOty 2 610 000 Exercisable 31.8.1995 – 23.7.1998 Exercise price 422.92 Baht 1 bond = 290 warrants (issued together, dealt separately ager 30 days)
Loyalty Warrants 1 bond held 31.7.1995 = 167 warrants Exercise price = last month’s average share price
Warrant Exercise Period 31.8.1995 23.7.1998 23.7.2000
31.10.1995
Bond Exchange Period 31.7.1997
31.7.1995
96 Loyalty warrants
98
99
31.7.2000
8
09/11/2011
Main components of the deal (2)
Component of Exchangeable Warrant the deal
The logic behind the original deal
To be achieved through the deal:
‐ Clean‐up the crossholding structure because of up‐coming IPO (dispose of 6% L&H shares) ‐ Minimize capital gain tax on stock sale: new BHV based in BriOsh Virgin Islands will issue bonds and sell them at the book value ‐ AQract foreign investors ‐ Receive financing for company’s acOviOes
09/11/2011
8
Advantages for the shareholders:
‐ Minimizing bankruptcy costs ‐ in case of financial distress exchanging bonds to exchange property may stave off bankruptcy (this is the special feature of exchangeable bonds, converOble bonds do not bear this advantage) Dispose of the shares without paying 30% capital gain tax Raising cheap debt ‐ company is able to offer the bond at a lower coupon rate ‐ less than it would have to pay on a straight bond Bondholders are not enOtled to vote => voOng control remains in the hands of the common stockholders Bond interest is a deducOble expense for the issuing company Delayed diluOon of common stock and earnings per share (EPS)
‐ ‐
‐ ‐ ‐
Main components of the deal (1)
Exchangeable Bonds QuanOty Face Value Coupon Maturity Bond Exchange Rate Exchange Property 9 000 $10 000 2% p.a. 31.7.2000 1 bond = 598.26 shares 5 384 355 shares of Land & Houses Warrants QuanOty 2 610 000 Exercisable 31.8.1995 – 23.7.1998 Exercise price 422.92 Baht 1 bond = 290 warrants (issued together, dealt separately ager 30 days)
Loyalty Warrants 1 bond held 31.7.1995 = 167 warrants Exercise price = last month’s average share price
Warrant Exercise Period 31.8.1995 23.7.1998 23.7.2000
31.10.1995
Bond Exchange Period 31.7.1997
31.7.1995
96 Loyalty warrants
98
99
31.7.2000
8
09/11/2011
Main components of the deal (2)
Component of Exchangeable Warrant the deal