Evaluation of Warrants, Preferred Stock and Hybrid Bonds
Warrants and preferred stock with an equity option nature have been increasingly used and products are becoming more and more complicated each year to meet diversified financing needs of companies in the area of equity finance.
We do evaluation and provide consultation on warrants, convertible bonds, preferred stock and stock options with a complicated structure by taking advantage of the know-how we have accumulated through our extensive business experiences together with the results of research on advanced option theory.(*)
We evaluate the value of warrants and preferred stocks from a fair and neutral standpoint, both for issuers who want to verify their non-advantageous placement and underwriters who want to analyze the reasonability of the issuing conditions. Also, we give advice on product design from a viewpoint of financial engineering, taking into account legal, tax and accounting standpoints.
As an evaluator of warrants, preferred stocks and other assets by utilizing advanced technologies, we capture a lot of business from many banks, securities companies, law firms and accounting firms as well as from Mizuho group companies.
- (*)We are able to evaluate the securities with the following conditions, which are generally difficult to evaluate precisely.
- limit on conversion.
- partial mandatory conversion.
- average price reset/cap/floor.
Recently, as a financing method, companies have been using mezzanine finance which is located midway between debt (i.e. bank loans and corporate bonds) and capital (common stock). Hybrid finance is represented by a subordinated bond or a subordinated loan categorized as mezzanine finance, being qualified as capital by rating agencies. Although it is classified to liabilities in financial statements, it may have an effect that it is qualified as real equity capital, to a certain degree, in the financial analysis by rating agencies. Recognizing these characteristics, leading European companies are actively using hybrid finance. In Japan, hybrid securities have also been issued after 2006. In addition to the quantitative analysis necessary for decision-making in investments related to hybrid financing, we conduct researches on the evaluation and risk analysis of hybrid finance.