Zzyxxyys financing plan

It is very chilly on a November Monday morning in 2020. You think it feels cold either due to the cold temperature or you are being nervous. maybe both. You are to explain your finance plan at the executives and board members meeting of Zzyxxyy construction Corporation. This is a privately held company it has been financed entirely by equity an internally generated funds only since its establishment in the year 2020.

Last July, the company received an approval from the City Hall of Playmore city to develop a resort part, where families can visit and shop. You were asked to seek from outside financial sources on getting their permission. Having evaluated several financing ideas (selling additional shares, issuing non-convertible bonds, an issuing unsecured notes), you recommend selling debenture bonds with 15-year maturity, 4.2%. its principal amount is $70 million. They will be callable at 104 any time after January 1, 2030. They are also convertible into ZZyxxyy common stock at the rate of 50 shares per $1000 bond.

This morning, www.wsj.com reports that market rate of interest for debt similar to these bonds are around 4.5%

You expect the following questions from the executives and board members:

1. What are debenture bonds? How are they different from the other bonds? Pick one type of bond that are significantly different from debenture bonds and compare them.
2. Why do you consider issuing bonds with callable option?
3. How is it possible to issue bonds paying 6.2% while Moodys show 6.5%?
4. Would the accounting journal entries and reporting differ if notes instead of bonds were recommended and sold?
5. Why might Zzyxxyy prefer to make the bonds convertible into common stock?

All answers should not be textbook definitions or internet sites. The board is eager to hear your own explanations. Please use your own words to your best ability to answer the questions above.