Question

All questions refer to Harvard Business School Metromedia Broadcasting Corporation case study

1. Why does Kluge want to issue debt?

2. Who are likely buyers of the various instruments?

3. What is the basis for underwriting debt that even the prospectus suggests is highly speculative

Answer 1

1. By issuing debt, an entity is free to use the capital it raises as it sees fit. Corporations and municipal, state, and federal governments offer debt issues as a means of raising needed funds. Debt issues such as bonds are issued by corporations to raise money for certain projects or to expand into new markets.
2. The likely buyers of various instruments are Government, Public at large, investors, employees and some times the competitors are likely with a view to taking over the company by having a major stake.
3. Underwriting simply means that your lender verifies your income, assets, debt and property details in order to issue final approval for your loan. An underwriter is a financial expert who takes a look at your finances and assesses how much risk a lender will take on if they decide to give you a loan