Bonds redemption

[changedman]

Homework can someone help to explain this in simpler terms?

"In the 3rd quarter, ABC Corp redeemed $400 million of 8.5% 2019 maturity bonds. These bonds were redeemed through the issuance of $450 million, 5.375% senior secured notes due in 2023, which substantially covered the redeemed notes' principal, accrued interest and related fees, premiums and expenses."


i understand the first sentence. but not the 2nd part highlighted in red.
so in order to redeem 400m they need to issue 450m of senior secured notes?

 

[Perisher]

Homework can someone help to explain this in simpler terms?

"In the 3rd quarter, ABC Corp redeemed $400 million of 8.5% 2019 maturity bonds. These bonds were redeemed through the issuance of $450 million, 5.375% senior secured notes due in 2023, which substantially covered the redeemed notes' principal, accrued interest and related fees, premiums and expenses."


i understand the first sentence. but not the 2nd part highlighted in red.
so in order to redeem 400m they need to issue 450m of senior secured notes?

Ya. The 450m substantially covered the 400m and thus redeemed the bonds that originally gave out 8.5% to now only need to give 5.375%.

Note, I'm not financially trained. You can wait for the others to answer you later.

 

[Shiny Things]

Ya. The 450m substantially covered the 400m and thus redeemed the bonds that originally gave out 8.5% to now only need to give 5.375%.

Note, I'm not financially trained. You can wait for the others to answer you later.

I think this is right. If ABC was able to redeem the 8.75s of 2019 and replace them with longer-maturity lower-interest bonds, then the 2019s must have been trading at a premium - so they would have had to pay more than $400m to redeem the 19s.

Incidentally, is "ABC Corp" Sabre Inc? The amounts are a bit different, but Sabre did an otherwise-identical bond swap (same tenors and coupons) back in April before the high-yield market imploded, and TRACE tells me the old 2019s were trading at about 104 just before the swap went through, which ties out very nicely with my "old bonds were trading at a premium" theory.

 

[frenchbriefs]

rolling over debt,like rolling over ur credit card debt to a 0 percent interest credit card.

 

[dork32]

a few years ago, dbs did that to their preference shares, they redeemed their 6% tranche and issue a 4.7% one

 

[wahkao3]

I'm not financially trained. You can wait for the others to answer you later.

haha tok kok sia

 

[wahkao3]

rolling over debt,like rolling over ur credit card debt to a 0 percent interest credit card.

yes, this is what it means

break it down into steps,treat them as 2 separate transactions

 

[Perisher]

haha tok kok sia

It's true mah...

I don't have any business/finance degree, never worked in any financial institution before, not even close.

All my financial stuff is self read, not traditionally trained so cannot be considered as professionally trained.

I only study/read whatever caught my interest so my knowledge isn't complete.

 

[wahkao3]

It's true mah...

I don't have any business/finance degree, never worked in any financial institution before, not even close.

All my financial stuff is self read, not traditionally trained so cannot be considered as professionally trained.

I only study/read whatever caught my interest so my knowledge isn't complete.

den u what degree? IT?

 

[Perisher]

den u what degree? IT?

I'm an artist.