Mark Sexton and Todd Story, the owners of S&S Air, have decided to expand their operations. They

Question:

Mark Sexton and Todd Story, the owners of S&S Air, have decided to expand their operations. They instructed their newly hired financial analyst, Chris Guthrie, to enlist an underwriter to help sell $20 million in new 10-year bonds to finance construction. Chris has entered into discussions with Renata Harper, an underwriter from the firm of Crowe & Mallard, about which bond features S&S Air should consider and what coupon rate the issue will likely have.

1. The security of the bond-that is, whether the bond has collateral.

2. The seniority of the bond.

3. The presence of a sinking fund.

4. A call provision with specified call dates and call prices.

5. A deferred call accompanying the preceding call provision.

6. A make-whole call provision.

7. Any positive covenants. Also, discuss several possible positive covenants S&S Air might consider.

8. Any negative covenants. Also, discuss several possible negative covenants S&S Air might consider.

9. A conversion feature (note that S&S Air is not a publicly traded company).

10. A floating rate coupon.

Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...