Subject category:
Finance, Accounting and Control
Published by:
Ivey Publishing
Version: 1999-12-08
Length: 14 pages
Data source: Field research
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Abstract
The focus of the case is on submitting a bid for $11 million of Sceptre Resources Ltd. debentures. The seller had originally received the debentures as part of a work-out agreement after Sceptre took over Oakwood Petroleum in a highly leveraged transaction. The debenture seemed to be the first true "junk" bond issue in Canada - the issue had absolutely no covenants protecting the holder. Sceptre had two other outstanding listed securities, callable convertible debentures, that ranked pari passu with the new debenture, permitting a basis for pricing the debenture. The case is ideal for introducing the concepts of a risk- return trade-off, the bond pricing and securities as bundles of characteristics. (A Microsoft Excel spreadsheet is available for use with this case, product 7A90B051.)
About
Abstract
The focus of the case is on submitting a bid for $11 million of Sceptre Resources Ltd. debentures. The seller had originally received the debentures as part of a work-out agreement after Sceptre took over Oakwood Petroleum in a highly leveraged transaction. The debenture seemed to be the first true "junk" bond issue in Canada - the issue had absolutely no covenants protecting the holder. Sceptre had two other outstanding listed securities, callable convertible debentures, that ranked pari passu with the new debenture, permitting a basis for pricing the debenture. The case is ideal for introducing the concepts of a risk- return trade-off, the bond pricing and securities as bundles of characteristics. (A Microsoft Excel spreadsheet is available for use with this case, product 7A90B051.)