Lending to a Parent: Extra Caution Needed? Pyne Inc. is the parent of Syne Inc., a 100%-owned subsidiary created many years ago. Pyne is a holding company in the process of issuing debenture bonds to the public through an investment banking firm (the underwriter). The bond proceeds will be lent to Syne under a lending agreement having the same interest rate and repayment terms of the bond offering (this use of proceeds information is disclosed in the bond offering prospectus).

1 What financial statements do you think should be provided to potential bond investors for their review before buying tbe bonds? Wby?

2 Can you think of any special concerns that potential bond investors should have because of the existence of the parent-subsidiary form of organization instead of a home office-branch form of organization?