Wholesale Foods PLC is a manufacturer of healthy meals designed for people who do not have much spare time and wish to prepare food quickly. The meals are sold nationally through a number of retail outlets.

The business has grown significantly over recent years, progressing from a family private limited company to becoming a PLC quoted on the stock market in 2010. At that time, a new Chief Executive was appointed in the interests of new shareholders. Over the following period, significant shareholders included some key mutual funds from the city.

You were appointed as Financial Director for Wholesale Foods PLC in April 2016, at the start of a new financial year.

The impact of Covid-19 and the restrictions placed on people going to work has actually had a positive impact on the company in that people have welcomed access to prepared but healthy meals. The creation of a website through which the public can order these meals and either collect or request delivery has contributed to very strong financial results over the past year.

Next month you have been asked to provide a report to the Board of Directors about the financial situation of the company, focusing on a number of areas highlighted recently by your fellow directors over the past few months.

PART 4: DEBT FINANCE:

Amongst the sources of finance that Wholesale Foods PLC has available is £15m of loan stock issued through the markets. Whilst preparing your report for the Board, you receive an email from the Sales Director who highlights the loan stock and says that he has become aware of alternative types and, in particular, convertible loan stock and loan stock with warrants.

He has asked that, within your report, you clarify how each operates.

Required:

Describe and compare convertible loan stock and loan stock with warrants, highlighting the advantages of each to an investor.

Answer rating: 100% (QA)

All the forms of financing mentioned in the questions have their own pros and cons and depen... View the full answer