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Question 1 (25 Marks) This Section consists of an article on corporate financing. Based on the article, apply your knowledge of Investment Banking to answer one question consisting of five (5) parts. After raising $8b, Cornerstone looks to expand portfolio companies Comerstone United Holdings Jamaica (CUHI) is now poised to expand its portfolio companies Barita Investments and MF&G Merchant Bank after raising $8 billion in the local capital market. I It raised $5 billion through a bond issue organised by Sagicor Investments Limited and an additional $3 billion from existing shareholders. Comerstone will use the funds raised to expand its subsidiaries' capacity to compete through various channels," said the company's founder Paul Simpson. CUHJis a special-purpose vehicle that acquired a majority stake in the merchant banking outfit MF&G Trust and Finance Limited in 2016. Its principal purpose is maximizing shareholder value through investing in undervalued companies in high growth industries via mergers and acquisitions, optimizing the capital structure of portfolio companies, and aggressively growing the market share of its subsidiaries CUHJ also comprises the same shareholders of Comestone Investments, which acquired Banta in August. Funds from the bondissue will also be use to refinance earlier loan with Sagicor to partially finance the Barta acquisition. The efficient tumaroundwas in my mind. Our initial target was 54 billion but we decided to do $5 billion due to indications from themarket and liquidity availability." Simpson said regarding the bond issue. "The efficient tumaroundwas in my mind. Ourinitial target was $4 billion but we decided to do $5 billion due to indications from themarketand liquidity availability." Simpson said regarding the bond issue. We believed we had a strong value proposition and a strong gowth story," he added. The tenure of the $5 billion bond is five years with a coupon rate of 7.25 per cent, secured by Banta shares in Comerstone Investment and approximately US $13 million in cash, Simpson revealed Simpson noted that the process of securing the funds from Sagicor was made more challenging as various otherbonds from more known andestablished entities were being floated with higher if not similar rates of retums. Commenting on the deal, Sagicor Investments CEO Kevin Donaldson said Sagicor believes in diverse financial institutions like Comerstone. We are supporting these initiatives because we believe it will encourage growth in the country, it will benefit us and all financial institutions in the long run," Donaldson said. What is more, Sagicor Investments has taken a 4.5 per cent stake in Comerstone. "As we continue to build capacity in or financial industry and other industries, whether through mergers and acquisitions; financing or expansion intemationally, it will result in economic growth and therefore our population will be more affluent and there will be more persons who are able to invest" Donaldson said. (Source: Loop Business) Questions 1 a) The article stated that CUHJissued bonds to expandits operations. Explain three differences betweenloans andbonds which are necessary for making financing decisions. (6 Marks) b) What strategic objectives of CUHJ are identified in the article? (4 Marks) c) Why was the process of securing funding challenging for CUHJ? (2 Marks) d) What were the reasons Sagicor offered in support of their client, CUHJ? (6 Marks) e) What are the considerations that determine whether a company raises financing from debt, equity, or convertible markets? (1 Marks) Question 1 (25 Marks) This Section consists of an article on corporate financing. Based on the article, apply your knowledge of Investment Banking to answer one question consisting of five (5) parts. After raising $8b, Cornerstone looks to expand portfolio companies Comerstone United Holdings Jamaica (CUHI) is now poised to expand its portfolio companies Barita Investments and MF&G Merchant Bank after raising $8 billion in the local capital market. I It raised $5 billion through a bond issue organised by Sagicor Investments Limited and an additional $3 billion from existing shareholders. Comerstone will use the funds raised to expand its subsidiaries' capacity to compete through various channels," said the company's founder Paul Simpson. CUHJis a special-purpose vehicle that acquired a majority stake in the merchant banking outfit MF&G Trust and Finance Limited in 2016. Its principal purpose is maximizing shareholder value through investing in undervalued companies in high growth industries via mergers and acquisitions, optimizing the capital structure of portfolio companies, and aggressively growing the market share of its subsidiaries CUHJ also comprises the same shareholders of Comestone Investments, which acquired Banta in August. Funds from the bondissue will also be use to refinance earlier loan with Sagicor to partially finance the Barta acquisition. The efficient tumaroundwas in my mind. Our initial target was 54 billion but we decided to do $5 billion due to indications from themarket and liquidity availability." Simpson said regarding the bond issue. "The efficient tumaroundwas in my mind. Ourinitial target was $4 billion but we decided to do $5 billion due to indications from themarketand liquidity availability." Simpson said regarding the bond issue. We believed we had a strong value proposition and a strong gowth story," he added. The tenure of the $5 billion bond is five years with a coupon rate of 7.25 per cent, secured by Banta shares in Comerstone Investment and approximately US $13 million in cash, Simpson revealed Simpson noted that the process of securing the funds from Sagicor was made more challenging as various otherbonds from more known andestablished entities were being floated with higher if not similar rates of retums. Commenting on the deal, Sagicor Investments CEO Kevin Donaldson said Sagicor believes in diverse financial institutions like Comerstone. We are supporting these initiatives because we believe it will encourage growth in the country, it will benefit us and all financial institutions in the long run," Donaldson said. What is more, Sagicor Investments has taken a 4.5 per cent stake in Comerstone. "As we continue to build capacity in or financial industry and other industries, whether through mergers and acquisitions; financing or expansion intemationally, it will result in economic growth and therefore our population will be more affluent and there will be more persons who are able to invest" Donaldson said. (Source: Loop Business) Questions 1 a) The article stated that CUHJissued bonds to expandits operations. Explain three differences betweenloans andbonds which are necessary for making financing decisions. (6 Marks) b) What strategic objectives of CUHJ are identified in the article? (4 Marks) c) Why was the process of securing funding challenging for CUHJ? (2 Marks) d) What were the reasons Sagicor offered in support of their client, CUHJ? (6 Marks) e) What are the considerations that determine whether a company raises financing from debt, equity, or convertible markets? (1 Marks)