Table of Contents
What does it mean when a company offers Senior Notes?
Senior Debt, or a Senior Note, is money owed by a company that has first claims on the company’s cash flows. It means the lender is granted a first lien claim on the company’s property, plant, or equipment. PP&E is impacted by Capex, in the event that the company fails to fulfill its repayment obligations.
How is senior debt calculated?
There are several measures to typically estimate a company’s maximum subordinated debt: Total debt to EBITDA ratio of 5-6 times. As mentioned above, senior debt typically accounts for 2-3 times debt to EBITDA, hence the remaining for subordinated debt. EBITDA to cash interest of about 2 times.
What is considered senior debt?
Senior debt is debt and obligations which are prioritized for repayment in the case of bankruptcy. Senior debt has the highest priority and therefore the lowest risk. Thus, this type of debt typically carries or offers lower interest rates.
What are outstanding Senior Notes?
Outstanding Bonds means any Bonds not redeemed or otherwise discharged. Existing Senior Notes means the Existing 2020 Senior Notes and the Existing 2021 Senior Notes, collectively. Senior Notes shall have the meaning assigned to such term in the recitals. Junior Notes means the Junior A Notes and the Junior B Notes.
Why do companies offer convertible senior notes?
Companies issue convertible bonds to lower the coupon rate on debt and to delay dilution. A bond’s conversion ratio determines how many shares an investor will get for it. Companies can force conversion of the bonds if the stock price is higher than if the bond were to be redeemed.
Why would a company buy back senior notes?
A company may choose to buy back outstanding shares for a number of reasons. Repurchasing outstanding shares can help a business reduce its cost of capital, benefit from temporary undervaluation of the stock, consolidate ownership, inflate important financial metrics, or free up profits to pay executive bonuses.
Are senior notes long term debt?
Senior Debt. A senior note is not the same thing as senior debt, although the terms are often used interchangeably. Senior debt is a broader term that is used to describe all of a company’s debts that have priority status in the event of bankruptcy. Most senior debt is collateralized.
Are senior notes debt?
A senior note is a type of corporate bond that carries a higher-priority claim in bankruptcy than a junior note, which means those who own senior notes get repaid first. Senior notes are typically unsecured debt; they aren’t secured by collateral.
What is senior leverage?
“Senior Leverage Ratio” shall mean the ratio of Senior Debt of the Parent and its Subsidiaries on a consolidated basis to EBITDA for the twelve (12) month period most recently ended.
What is a senior secured note?
Senior Secured Notes means secured or unsecured notes or other debt of the Company issued after the Closing Date, and the Indebtedness represented thereby; provided that (a) the terms of which do not provide for any scheduled repayment, mandatory redemption or sinking fund obligations prior to the Latest Maturity Date.
What is a private offering of senior notes?
Senior Note Offering means that certain private placement by Parent conducted pursuant to Section 4(2) of the Securities Act of Senior Notes for resale to “qualified institutional buyers” pursuant to Rule 144A under the Securities Act.
What is a senior subordinated note?
Senior Subordinated Notes means any issuance of Notes under the Indenture by the Issuer that are part of a Class with an alphanumerical designation that contains any letter from “B” through “L” of the alphabet.
Is senior unsecured debt subordinated?
Senior Unsecured Debt means indebtedness for borrowed money that is not subordinated to any other indebtedness for borrowed money and is not secured or supported by a guarantee, letter of credit or other form of credit enhancement.
Is a revolver senior debt?
A revolver is a form of senior bank debt that acts like a credit card for companies and is generally used to help fund a company’s working capital needs.
Are senior secured notes first lien?
Senior debt is often secured by collateral on which the lender has put in place a first lien. Usually this covers all the assets of a corporation and is often used for revolving credit lines. It is the debt that has priority for repayment in a liquidation.
Are convertible senior notes good or bad?
Convertible notes are good for quickly closing a Seed round. They’re great for getting buy in from your first investors, especially when you have a tough time pricing your company. If you need the cash to get you to a Series A that will attract a solid lead investor at a fair price, a convertible note can help.
What happens to convertible note if startup fails?
When a startup fails, the company typically has run out of money. The owner of a convertible note may get nothing, or at best may only receive pennies on the dollar. You also may be able to write off your loss.
Are convertible notes a good investment?
So at the end of the day, convertible notes (and other deferred pricing structures like SAFEs) are not good for investors and they are also not ideal for entrepreneurs. Their defects tend to get over-looked in very small rounds because they are a cheap and easy transaction to do.
Do stock buybacks raise stock prices?
A buyback will increase share prices. Stocks trade in part based upon supply and demand and a reduction in the number of outstanding shares often precipitates a price increase. Therefore, a company can bring about an increase in its stock value by creating a supply shock via a share repurchase.
Is it good to sell shares in buyback?
In case of a buyback, the company may offer Rs 330-350 or even higher price. This premium will encourage shareholders to sell the shares back to the company. However, it is advised two-three days ahead of the buyback record date, an investor can buy and hold the stocks in his DP.
Are buybacks good for investors?
Because buybacks reduce the number of shares outstanding, investors effectively own a bigger piece of the company, Moors pointed out. “That’s one reason buybacks are attractive to investors,” he said. A buyback “effectively increases a company’s earnings per share, as earnings are distributed across fewer shares.”Jan 8, 2021.
