How much value is added from debt to equity because of this subsidy?

Suppose Blackstone arranges for $$1$ billion of strip financing to be used in a leveraged buyout. The strip financing is composed of three items: a $$400$ million bank loan, $$500$ million of bonds, and $$100$ million of common shares. The $$500$ million bonds are subsidized in that they only pay a $3\%$ coupon even though the going market rate on such bonds is $7\%.$ The bank loan is not subsidized. The LBO firm will pay the interest $($i$.$e$.$ coupon$)$ plus an additional $$20$ million of principle each year on the subsidized bonds for the next $4$ years. It is anticipated that in the fifth year the firm will go public again and repay the outstanding principle and interest on these bonds.

H$1.$ ow much value is added from debt to equity because of this subsidy?

$87\mathrm{.}4$

$107\mathrm{.}4$

$117\mathrm{.}4$

$75\mathrm{.}89$

$97\mathrm{.}4$