FNCE 251 Lecture Notes - Lecture 14: Dividend Yield, Implied Volatility, Spot Contract
Document Summary
Debt exchange: deagio (parent company of pillsbury that gm wants to acquire) gets 33% stake: gm takes out m loan and pays about a dividend to deagio. Deagio can get up to . 142b on the transaction based on the share price of gm. The alternative to this structure: gm could have taken out debt and paid deagio b in cash and b in stock. This would have looked the same for deagio. Gm chose to do a debt exchange, because gm already has m in outstanding debt, and pillsbury was under-levered, so they could get more debt. If theresa bond contract, there may be a premium. It does(cid:374)"t (cid:373)ake a differe(cid:374)(cid:272)e for (cid:272)reditors if the(cid:455)"re le(cid:374)di(cid:374)g to gm or pills(cid:271)ur(cid:455), (cid:271)ut gm could always take out a loan and give the money to pillsbury. It"s a(cid:271)out the ta(cid:454)es, (cid:374)ot a(cid:271)out the (cid:272)reditors or rati(cid:374)gs (cid:271)e(cid:272)ause of the a(cid:271)o(cid:448)e: ho(cid:449) di(cid:448)ide(cid:374)ds are ta(cid:454)ed: ta(cid:454)ed as (cid:272)apital gai(cid:374).
