Symantec Corporation Convertible Notes With Call Spread Case Solution & Answer

This Case is about FINANCIAL MARKETS

PUBLICATION DATE: September 19, 2012 PRODUCT #: W10025-HCB-ENG

A consultant was requested by the board of directors of Symantec Corporation for an unaffiliated opinion on an important funding choice. Symantec was working with several investment banks on a blueprint to raise debt to repurchase common shares. The advisor found it to be an intriguing funding strategy; whereas leverage would be reduced by repurchasing shares promptly would improve Symantec’s fiscal influence at a possibly substantial dilutive price to the company’s equity. The business conversed with the investment banks to acquire a call spread on its own stock, covering precisely the same number of shares as would be issued to noteholders upon alteration. After reviewing the proposal, the advisor attempted to understand the motivation supporting the construction of the trade. Would Symantec select to issue bonds that are convertible, and would it mean to purchase the call spread?

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