A firm has a loan from Bank A, a loan from Bank B, a senior bond, and a junior bond. The loan from Bank A has the highest priority, followed by the Bank B loan, followed by the senior bond. The junior bond has the lowest priority. The firm also has publicly traded shares. The Bank A loan has a face value of $200 million, the Bank B loan has a face value of $300 million, the senior bond has a face value of $100 million, and the junior bond has a face value of $100 million. The market value of the firm is $550 million.

What is the market value of bank loans, senior bonds, junior bonds, and shares? Suppose the firm will undertake a financial restructuring in bankruptcy. What might that look like?

Answer rating: 100% (QA)

The weights of the articles are as shown below Particulars Bank A Loan Ban... View the full answer