a. September 2008 - Goldman Sachs deal - Comment on the structure of the transaction and how it employed fixed-income thinking and equity thinking in the same deal. Use numbers to explain the deal. Make an assessment of the warrants and their value to the transaction, how do the warrants work? Did the deal work out perfectly for Mr. Buffett, the way his people laid it out on a spreadsheet? 10 marks

b. What is the benefit of using Preferred shares in the GS deal compared with using a Convertible Bond structure for example, like what Warren Buffett did with First Empire/M&T Bank in the early 1990s? What mistake did Buffett make with the GS deal; how did he fix this in the 2011 Bank of America deal? 5 marks

c. Convertible Bond valuation - Lets say General Electric stock currently sells for $6.72 compared with the 1999 high of nearly $60 per share. Its a dog with fleas, right? If a (face value $1,000) bond is convertible into common stock at a conversion price of $20, at any time, what is the conversion ratio? Is the conversion premium reasonable or expensive given what you know about GE right now? What is the floor value of the convertible security explain fully? Assume that time = 5 years Kd = 10%. - 5 marks

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