Download - Leasing Warrants Convertibles
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Prepared by:Jammie Ann Felpe
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Aleaseis acontractualarrangement calling for thelessee(user) to pay thelessor(owner) for use of a property.
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Sale and LeasebackAn arrangement whereby a firm sells land, buildings, or equipment and simultaneously leases the property back for a specified period under specific terms.
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Operating LeasesA lease under which the lessor maintains and finances the property; also called a service lease.
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Financial or Capital LeasesA lease that does not provide for maintenance services, is not cancelable, and is fully amortized over its life; also called a capital lease.
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Off Balance Sheet FinancingFinancing in which the assets and liabilities involved do not appear on the firms balance sheet.
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The Financial Accounting Standards Board issued SFAS #13Statement of Financial Accounting that details the conditions and procedures for capitalizing leases.
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Regular capital budgeting procedures.How to finance the asset?Borrow? Retain earnings? Issue new stock? Alternatively, the asset can be LEASED.***A LEASE is comparable to a LOAN.
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Estimated Residual ValueThe Value of leased property at the end of the lease term.Increase Credit Availability
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A long-term option to buy a stated number of shares of common stock at a specified price.
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Use warrants as sweeteners- help make the issue debt and preferred stock attractive
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Convertible SecurityA security, usually a bond or preferred stock, that can be exchanged at the option of the holder for the common stock of the issuing firm.
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Issuers standpointOffer a company the chance to sell debt with a low interest rate in exchange for a chance to participate in the companys success if it does well.Convertibles provide a way to sell common stock at prices higher than those currently prevailing.
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1.T he exercise of warrants brings in new equity capital, while the conversion of convertibles results only in a switch from debt to equity.FlexibilityDifference in issuance costs between debt with warrants and convertible debt.