--%>
Assignment Help - homework help

Relationship between the preferred stock the fund

Quetion:

A private equity fund invests $100 million into a portfolio company and receives 100% of the preferred stock and 80% of the common stock of the company.  The preferred stock carries a face value of $100 million with an 8% accrued dividend (PIK) and the common stock will be issued for 1 cent per share (its nominal value on date of investment). The $100 million was called by the GP (General Partner) of the fund from the fund's limited partners. For all funds called, the first distributions received by the fund goes to the limited partners (the partners from whom the funds were called), until they receive 100% of the called capital plus an 8% compounded preferred return. The fund invests in all of the portfolio companies in the form of participating redeemable preferred stock (preferred stock plus warrants for common stock at no additional cost) with an 8% coupon.   Is there a relationship between the preferred stock the fund owns of the company and the preferred return the fund distributes to the limited partners?  Explain.

 

 

   Related Questions in Corporate Finance

  • Q : Define the term Commercial Paper

    Commercial Paper: It is an unsecured obligation issued by the corporation or bank to finance its short-term credit requirements, like accounts inventory and receivable. Maturities usually range from 2 to 270 days. The commercial paper is accessible in

    		•
  • Q : What is Regular meeting of day-to-day

    Regular meeting of day-to-day commitments: The estimation of WCR also helps to ensure that there is positive WC existence. This proves helpful in meeting requirements which are regular in nature such as payments of salaries, wages, rental charges etc.

    		•
  • Q : Is Capital Cash Flow identical with

    Is Capital Cash Flow identical with Free Cash Flow?

    		•
  • Q : Problem on Zero coupon bonds

    Robertsons, Inc. is planning to enlarge its specialty stores into 5 other states and finance the expansion by issuing 15-year zero coupon bonds with a face value of $1,000. When your opportunity cost is 8 % and similar coupon-bearing bonds will recompense semi-annuall

    		•
  • Q : Market for Corporate Bonds Write some

    Write some point regarding Market for Corporate Bonds.

    		•
  • Q : Analysis on Stock Prices Using the last

    Using the last 3 years of closing stock prices on the first trading day of each month from January,  2010 through December 2012 for Apple (APPL) and the S&P 500 (market) for the same date range 1)    &n

    		•
  • Q : Active versus Passive fund managers

    Active vs. Passive fund managers: Passive fund managers adopt a long term buy and hold strategy. Usually, stocks are purchased so that the portfolio’s returns will track those of an

    		•
  • Q : How present value of tax shields be

    I have two valuations of the company that we set as an objective. Within one of them, the present value of tax shields (D Kd T) computed using Ku (required return to unlevered equity) and, in one, by using Kd (required return to debt). The second valuation is too high

    		•
  • Q : Explain usual value of the sales of net

    Does the usual value of the sales and of the net income of Spanish companies have anything to do along with sustainable growth?

    		•
  • Q : Standard deviation of portfolios returns

    Assume that you have $50,000 which you want to invest in two companies, XYZ Books and ABC Audio. XYZ has a return of 10% and standard deviation 15%, while ABC has return of 15% with a standard deviation of 20%. The correlation coefficient between them is .5. Your port

    		•