Assume that the existing debt has covenants barring firm X from issuing new senior debt without all creditors consent. The shareholders and creditors must therefore negotiate. g. Say a negotiator tables the following deal: firm X issues new equity to fund the project, and creditors write down 10% of face value to $31.5m, i.e., face value reduced by 10%35=$3.5m. Will shareholders agree if the only alternative is the status quo? Will creditors agree? Explain. h. Say a negotiator tables the following deal: firm X issues new equity to fund the project, and creditors write down 20% of face value to $28m, i.e., face value reduced by 20%35=$7m. Will shareholders agree if the only alternative is the status quo? Will creditors agree? Explain. i. Say a negotiator tables the following deal: The firm issues new equity to fund the project and creditors swap their debt against 30% of the equity. Will shareholders agree? Will creditors agree? Explain. j. Say a negotiator tables the following deal: The firm issues new equity to fund the project and creditors swap their debt against 40% of the equity. Will shareholders agree? Will creditors agree? Explain.

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Here are my analyses of the different debt restructuring deal proposals g 10 debt writedown to 315m ... View the full answer