Notice that, like Pierre Foods, we can simplify this by examining the most important details: the $519 million of revolving credit, the $318 million of senior secured notes, and the $419 million of equity. By late 2009, GSO was impressed with the progress Crosstex had made in 2008–2009 in managing its debt and was interested in providing the energy company with rescue financing. GSO knew that Crosstex would need a large-scale debt refinancing in a highly volatile unsecured bond market to satisfy its revised debt obligations. The credit markets had all but dried up in the wake of the global financial crisis. Meanwhile, Crosstex was also considering an equity injection from a third party. For GSO, the potential plan of action had three steps: Inject cash into Crosstex through GSO funding Refinance Crosstex’s debt by issuing unsecured debt and repaying the loan (deflate the $519 million in revolving credit and inflate the $318 million in senior secured notes) Restore the dividend Given the information provided, what about Crosstex strikes you as a good investment opportunity for GSO?
Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
Notice that, like Pierre Foods, we can simplify this by examining the most important details: the $519 million of revolving credit, the $318 million of senior secured notes, and the $419 million of equity.
By late 2009, GSO was impressed with the progress Crosstex had made in 2008–2009 in managing its debt and was interested in providing the energy company with rescue financing. GSO knew that Crosstex would need a large-scale debt refinancing in a highly volatile unsecured bond market to satisfy its revised debt obligations. The credit markets had all but dried up in the wake of the global financial crisis. Meanwhile, Crosstex was also considering an equity injection from a third party.
For GSO, the potential plan of action had three steps:
- Inject cash into Crosstex through GSO funding
- Refinance Crosstex’s debt by issuing unsecured debt and repaying the loan (deflate the $519 million in revolving credit and inflate the $318 million in senior secured notes)
- Restore the dividend
Following are the information given about the company:
- The company has the $519 million of revolving credit, the $318 million of senior secured notes, and the $419 million of equity.
- The company need a large-scale debt refinancing in a highly volatile unsecured bond market to satisfy its revised debt obligations.
- The company is also considering an equity injection from a third party.
- The potential plan of action had three steps:
-
- Inject cash into Crosstex through GSO funding
- Refinance Crosstex’s debt by issuing unsecured debt and repaying the loan (deflate the $519 million in revolving credit and inflate the $318 million in senior secured notes)
- Restore the dividend
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
