After Dans EFN analysis for East Coast Yachts (see the Closing Case in Chapter 3), Larissa has decided to expand the companys operations. She has asked Dan to enlist an underwriter to help sell $45 million in new 30-year bonds to finance new construction. Dan has entered into discussions with Renata Harper, an underwriter from the firm of Crowe & Mallard, about which bond features East Coast Yachts should consider and also what coupon rate the issue will likely have. Although Dan is aware of bond features, he is uncertain as to the costs and benefits of some of them, so he isnt clear on how each feature would affect the coupon rate of the bond issue.

advantages and disadvantages:

security of bond

seniority of bond

presence of sinking fund

call provision with specific dates and prices

make whole call provision

positive covenants (also possible positive covenants)

negative covenants

conversion feature (publicly traded company)

floating rate coupon