Case 1 Deist Financing.pdf 1 @ -= 5 O File C:/Users/jorda/OneDrive/Desktop/Case%201%20%20Debt%20Financing.pdf of & Q + Page view All Read aloud 1 Add text | Draw Case Questions Please uploud a Word or PDF file with your responses to the questions below. Highlight Erase 1. Consider the suggestions from Ryan Konyvclo and Yuc Ming, Docs a higher coupon rate reflect a greater cost of borrowing? Why or why not? (3-6 sentences) K 2. Consider Katerina Naivny's suggestion to issue bonds where sovereign interest rates are lowest. Does that strategy minimize the cost of borrowing? Why or why not? (3-6 sentences) 3. Calculate the AIC, IRR, and credit spread for the bond issuance choices. Also calculate the proceeds in CAD. Assume CORRA will remain constant at 1.5% for Ming's bond. 2. Konyvelo's Low Coupon Bonds b. Ming's Floating Bonds c. Hausman's Canadian Bonds d. Naivny's Eurocuro Bonds Do you notice any "red flags" with the proposed bonds? 4. Cease assuming that CORRA will remain constant. Consider the swap quotations in Exhibit 5. Show and Explain how Hausman's bond from Q3 is dominated by another choice combined with a swap. (Note: here you are assuming default risk is negligiblc.) 5. Explain some risks associated with the remaining choices. (6-12 sentences) 6. Which choice, with or without swaps, would you recommend to Silvia? Why? (4-8 sentences) 78T Mostly cloudy LD 12:31 PM 4/11/2022 22 Case 1 Deist Financing.pdf 1 O File C/Users/jorda/OneDrive/Desktop/Case%201%20%20Debt%20Financing.pdf @ - of 8 Q Q + 2 Page view A Read aloud 1 Add text | Draw Highlight Erase Exhibit 1: Spot and Forward Exchange Rates (April 2021) USD/CAD GBP/CAD EUR/CAD Spot 1.2594 1.7367 1.4781 1 month forwad 1.2631 1.7337 1.4759 3 months forward 1.2575 1.7337 1.4808 6 months forward 1.2565 1.7364 1.483 SEK/CAD 0.1449 0.1445 0.1442 0.1441 Exhibit 2: Sovereign Debt Interest Rates (10-year) S&P Credit Spread ys Spread y's Country Rating 10Y Yield German Bund UST-Note Switzerland MAA -0.34% -1.1 bp -205.2 bp Germany MA -0.33% 0.0 bp -204.1 bp Netherlands MA -0.27% 5.4 bp - 198.7 bp France AA -0.08% 24.6 bp -179.5 bp Belgium -0.02% 30.9 bp - 173.2 bp Spain A 0.31% 63.4 bp -140.7 bp Sweden AAA 0.38% 70.7 bp -133.4 bp United Kingdom AA 0.80% 112.5 bp -91.6 bp Canada AAA 1.52% 184.4 hp -19.7 bp United States AA+ 1.71% 204.1 bp 0.0 bp *These yiclds are estimated from other maturities when the 10y note is unavailable. Exhibit 3: Revenue Breakdown by Product and Country (CS millions converted at spot exchange rates) Product Line/Country Canada USA UK EU Sweden Cedar Planks 5.6 12.9 3.5 1.2 0.8 Smoking Chips 1.9 6.4 1.1 0.2 0 0.9 0.S 0 0.3 0 Totals 8.4 19.8 4.6 1.7 0.8 Totals 24 9.6 1.7 35.3 Wood wraps 78T Mostly cloudy 12:32 PM 4/11/2022 22 Case 1 Deist Financing.pdf 1 0 File C/Users/jorda/OneDrive/Desktop/Case%201%20%20Debt%20Financing.pdf @ !! 7 of 8 Q + Page view All Read aloud Add textDraw Highlight Erase Exhibit 4: Emplovees' Bond Proposals Exhibit 4a: Konyvelo's Low Coupon Bond Country of Issuance Currency of Issuance Face Value (mil) Coupon Rate (annual) Maturity USA USD 30 1.50% 10 years 0.35% Estimated Fccs + Taxes Estimated Issuance Price (per 1000 face value) 795.35 Exhibit 4b: Ming's Floating Bond (CORRA = 1.5%) Country of Issuance Canada Currency of Issuance CAD Face Value (mil) 32 Coupon Rate (annual) CORRA + 150 bps Maturity 10 years 0.50% Estimated Fees + Taxes Estimated Issuance Price (per 1000 luce value) 916.44 Exhibit 4c: Hausman's Canadian Bond Country of Issuance Currency of Issuance Face Value (mil) Coupon Ratc (annual) Maturity Canada CAD 32 3.50% 10 years 0.50% Estimated Fees + Taxes Estimated Issuance Price (per 1000 face value) 910-33 78T Mostly cloudy w 12:32 PM 4/11/2022 22 Case 1 Deist Financing.pdf 1 O File C:/Users/jorda/OneDrive/Desktop/Case%201%20%20Debt%20Financing.pdf @ -= a of 8 Q + D Page view A Read aloud II Add textDraw Highlight Erase Exhibit 4d: Naivny's Eurocuro Bond Country of Issuance Currency of Issuance Face Value (mil) Coupon Rate (annual) Maturity USA EUR 24 2.50% 10 years 1.75% Estimated Fees + Taxes Estimated Issuance Price (per 1000 face value) 873.64 Exhibit 5: Interest Rate Swap Quotes The following quotation represents the fixed rate (in bps) at which the swap bank will scll'buy the floating reference rates. The quotations are a bid-ask spread. If the bank is receiving the reference coupons, they will pay the bid. If they are sending reference coupons, they demand the usk. For example, to buy SARON from the swap bank, a trader would have to pay 105 bps fixed. Bid. Ask (bps) 135 - 175 (45) - 85 Reference Rale CORRA ESTER LIBOR (3- month) SARON SOIR SONIA 115-195 (-45) - 105 155 - 185 55.105 78T Mostly cloudy LD 12:32 PM 4/11/2022 22