I am relatively familiar with the markets, and normally do not follow penny stocks. However, I am interested in knowing why a company would bother doing the following?DENVER, Apr 30, 2004 /PRNewswire-FirstCall via COMTEX/ -- SAMSONITE CORPORATION (SAMC) announced today that it proposes, subject to market and other customary conditions, to commence a private offering of new senior and senior subordinated notes in an aggregate principal amount of approximately $325 million. The Company intends to use the proceeds of the offering, along with cash on hand and borrowings under its credit facility, to retire its outstanding 10 3/4% senior subordinated notes due 2008 and to pay related fees and expenses. The Company can give no assurance that the proposed offering of the notes will be completed. Since the notes are not due until 2008, why make an additional offering to create new notes to pay off the current notes that are not due for four more years? Any ideas, or am I confusing apples for oranges?Thanks
Greetings,Here is my guess. It may be that the notes to be retired are at a higher interest rate than what the new notes will be. In a way this could be similar to a person re-financing their mortgage I think. The key is that while the note isn't due for 4 years there would be 4 years of interest at 10 3/4% that may be higher than what the company would pay now with new notes. Also worth noting is that the new debt doesn't have a timeline to them so that they could be very long term notes that wouldn't be due till 2024 or something and thus the company can really stretch things out.Just a thought,JB
Thanks for the response - I think you are right about the lower rate and longer period of time. Only thing that makes any sense.Thanks again!
That would make perfect sense. Compare current interest rates to that of 3 - 3.5 years ago. Although they have hiked themselves up recently, interest rates are currently very low. If a compnay would be able to call their 10 3/4% notes and restructure it so that it is being offered at a much lower rate, that would save them a lot of money.
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