Viable Coupon Rate Set in Arm’s Length Stock Transaction
Client: U.S. Hedge Fund
Challenge: Respect Privacy While Analyzing a Complex Ownership Structure
A U.S. hedge fund was purchasing new preferred stock from an entertainment company in which it also had partial ownership. Fund managers asked AccuVal to establish an appropriate coupon rate. The biggest challenge to this engagement was conducting essential industry research in a way that would in no way divulge the identity of the companies that were a party to this transaction. No small task in a tight-knit industry.
AccuVal Approach
Given the common ownership interest, the coupon rate needed to be marked to current market rates so that the company's stock could be accurately compared to the stock of industry competitors. To do so, AccuVal had to navigate a very complex, multi-tiered ownership structure. The various holdings and interests of each tier had to be analyzed and understood as part of the process of setting a reasonable coupon rate, based on a mark to market valuation. Using its industry experience and detailed research capabilities, AccuVal carefully reviewed the company's income potential as well as the growth projections for that industry. AccuVal used this information as its starting point to analyze transactions of comparable shares to determine an appropriate market rate.
Bottom Line: AccuVal Analysis Forms Basis for Sound Coupon Rate
Hedge fund management confidently set the coupon rate with AccuVal's findings and rested comfortable knowing that the appraisal process did not alert competitors to their activities.
The AccuVal AdVantage™
Market knowledge. Depth of experience in the entertainment industry. Unparalleled research. The ability to complete sophisticated market analysis with complete confidence. The capability to interpret very complicated transactions completed by hedge funds. That's The AccuVal AdVantage™ at work
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