Westie Recording Company Inc.: Financing an Expansion
Mini-Case
Nickle Stock is the chairperson of Westie Recording Company Inc. She is the person responsible for the tremendous growth this company has enjoyed over the past three years. It was Nickle's intuition and clever negotiating that enabled the company to sign two very hot recording artists: Half a Dollar and W’ellie. These groups have generated profits of over $25 million.
The future looks even brighter at the firm because several current and aspiring entertainers have indicated an interest in signing on with Westie Recording. This incredible growth has delighted everyone at the company, but it has also created a major problem for Nickle. Westie Recording has never been a major player in the recording industry, primarily because of limited capital. In order to take the company to the next level Nickle realizes that she will need to expand the firm's personnel and equipment. The amount of new funds required to finance this needed expansion is $150 million. Nickle has started to consult with others about how to finance this major expansion of the company.
1. One funding source under consideration is the issuance of $150 million worth of corporate bonds. A financial advisor predicted that in order for the fast growing company to attract investors, it would have to put up collateral to back-up the bond issue. The type of bond the financial advisor suggests is: secured bonds
2. Nickle is concerned about the interest rate risk if the company decides to issue bonds. Nickle would like protection from interest rate fluctuation. Therefore, the bond issue's features should include a(n): coupon rate
3. If Westie Recording elects to offer an IPO (Initial Public Offering), it will involve preparing full financial disclosure with the SEC. The firm is advised to solicit the services of an investment banker/underwriter, who will analyze the market and determine the best price for the new issue of Westie Recording stock. The offering will then be sold on the primary
Nickle Stock is the chairperson of Westie Recording Company Inc. She is the person responsible for the tremendous growth this company has enjoyed over the past three years. It was Nickle's intuition and clever negotiating that enabled the company to sign two very hot recording artists: Half a Dollar and W’ellie. These groups have generated profits of over $25 million.
The future looks even brighter at the firm because several current and aspiring entertainers have indicated an interest in signing on with Westie Recording. This incredible growth has delighted everyone at the company, but it has also created a major problem for Nickle. Westie Recording has never been a major player in the recording industry, primarily because of limited capital. In order to take the company to the next level Nickle realizes that she will need to expand the firm's personnel and equipment. The amount of new funds required to finance this needed expansion is $150 million. Nickle has started to consult with others about how to finance this major expansion of the company.
1. One funding source under consideration is the issuance of $150 million worth of corporate bonds. A financial advisor predicted that in order for the fast growing company to attract investors, it would have to put up collateral to back-up the bond issue. The type of bond the financial advisor suggests is: secured bonds
2. Nickle is concerned about the interest rate risk if the company decides to issue bonds. Nickle would like protection from interest rate fluctuation. Therefore, the bond issue's features should include a(n): coupon rate
3. If Westie Recording elects to offer an IPO (Initial Public Offering), it will involve preparing full financial disclosure with the SEC. The firm is advised to solicit the services of an investment banker/underwriter, who will analyze the market and determine the best price for the new issue of Westie Recording stock. The offering will then be sold on the primary