This topic has 4 replies, 2 voices, and was last updated 1 month ago by John Moffat.

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December 6, 2018 at 8:29 pm #488096
jayped
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Sir,

The point at which the holders of the certificates will receive nothing and below which the holders of the C-rated loan notes will not receive their full income will be an annual income of $18·83 million (a return of 9·4%), which is 14·4% less than the income that the non-executive director has forecast.

Why wouldn’t the holders of C-rated loan notes receive their full income if annual income is $18.83m? And how is 14.4% calculated?

Thanks.
December 7, 2018 at 7:16 am #488175
John Moffat
Keymaster
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For the C-rated loan notes to get their full income, the total available needs to be 18.63 (as per the table in the answer). This is after the service charge of 0.20, so it needs income to be 18.83.

18.83 is 14.4% less than the 22.00 that has been forecast.
January 22, 2021 at 6:46 am #607501
joynow
- Topics: 17
- Replies: 26
Hi, Sir
How to find the return of 9.4% ?
January 22, 2021 at 7:56 am #607505
joynow
- Topics: 17
- Replies: 26
Hi again, Sir

Balance to Subordinated 2.07m due to rental income is 5% lower than forcast, giving return 11.5%, below the return of B & C ( 12% , 13%) .

How is that holder of certificate will receive nothing and below?

Also, why holder of C rated loan will not receive full income, isn’t the income of c = 3.51?
January 22, 2021 at 9:33 am #607525
John Moffat
Keymaster
- Topics: 57
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The subordinated certificates only get any income that is remaining after paying the interest on the other loan notes.

The company has to pay 18.63m to the other loan notes, which means that they need to earn 18.83m (0.20 more because of the service charge). If they earn more than this the excess goes to the subordinated certificates, but if they earn less then the subordinated get nothing (and the C rate loan note holders will suffer as well).

They are investing $200M, and therefore in order to earn at least 18.83M they need to be getting a return on the 200M of at least 18.83/200 = 9.4%.
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