ppt_ch10 Medium- to Longer-term Debt 外汇与外汇市场 教学课件

10.1 Introduction
• Matching principle
– Firms should match the maturity structure of their assets with the maturity structure of their sources of funds (liabilities and shareholder funds)
10.2 Term Loans or Fullydrawn Advances (cont.)
– Example 2 (cont.)
A $21 500
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10.2 Term Loans or Fullydrawn Advances (cont.)
• Calculating the loan instalment— ordinary annuity
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(10.1)
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Chapter Organisation
10.1 Introduction 10.2 Term Loans or Fully-drawn
Advances 10.3 Mortgage Finance 10.4 Debentures, Unsecured Notes and
Subordinated Debt
Chapter 10
Medium- to Longer-term Debt
Chapter Organisation (cont.)
10.5 Calculations: Fixed Interest Securities
10.6 Leasing 10.7 Direct Credit Substitutes 10.8 Summary
• Variable interest rate loans dominate, but fixed rates are available for loans with terms of up to 2 years
– Credit risk of borrower (risk premium) – Term of the loan – Repayment schedule
10.2 Term Loans or Fullydrawn Advances (cont.)
• Other fees include
– Establishment fee – Service fee (charged monthly) – Commitment fee (levy on any portion of the total
10.2 Term Loans or Fullydrawn Advances (cont.)
• Loan covenants (cont.)
– Breach of covenant results in default of the loan contract entitling lender to act
• Positive covenant requires borrower to take prescribed actions e.g. maintain a minimum level of working capital
• Negative covenant restricts the activities and financial structure of borrower e.g. amount of dividend, maximum debt to equity ratio
• Therefore, longer-term assets should be funded with longer-term liabilities and equity
– The repayment schedule of debt financing for long-term projects should align with the project’s expected future cash flows
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(10.2)
10.2 Term Loans or Fully-
drawn Advances (cont.)
• Calculating the loan instalment— annuity due (cont.)
– Example 2: A business proprietor is purchasing a computer system for the business at a cost of $21,500. a finance company has offered a term loan over seven years at a rate of 12 per cent per annum. The loan will be repaid by equal monthly instalments at the beginning of each month. Calculate the amount of the loan instalments.
approved loan amount that is not drawn down within that period)
– Line fee (a fee charged on the total amount of funds
advanced to a borrower)
– Bill option clause fee (an agreement that allows a
10.2 Term Loans or Fullydrawn Advances (cont.)
• Calculating the loan instalment— ordinary annuity (cont.)
– Example 1: Floppy Software Limited has approached Mega Bank to obtain a term loan to finance the purchase of a new high-speed CD burner. The bank offers a $150,000 loan, amortised over five years at 8 per cent per annum, payable monthly. Calculate the monthly loan instalments.
$375.78 monthly instalment
Chapter Organisation
10.1 Introduction 10.2 Term Loans or Fully-drawn
Advances 10.3 Mortgage Finance 10.4 Debentures, Unsecured Notes and
• periodic loan instalments consisting of interest due and reduction of principal
– Deferred repayment loan
• loan instalments commence after a specified period related to project cash flows, and the debt is amortised over the remaining term of the loan
bank to convert a term loan into a commercial bill)
10.2 Term Loans or Fullydrawn Advances (cont.)
• Loan covenants
– Restrict the business and financial activities of the borrowing firm
• The mortgage is registered on the land title
10.3 Mortgage Finance (cont.)
• The mortgage is discharged when the loan is repaid
• If the mortgagor defaults on the loan, the mortgagee is entitled to foreclose on the property
10.1 Introduction (cont.)
• Repayment may be
– Interest only during term of loan and principal repayment on maturity
– Amortised loan (credit foncier loan)
10.2 Term Loans or Fullydrawn Advances (cont.)
• Calculating the loan instalment—
ordinary annuity (cont.)
– Example 1 (cont.)
A $150 000