[vincentbegin]

Hi, How is your study going along? Thanks for your comment because you are asking exactly what I am worrying which is deferring my decision whether to proceed with this.
I don’t have a university degree so only qualification i have is ACCA. Getting a masters will definitely helpful but I do not want it to be too difficult as I need to work full time plus overtime.

[vincentbegin]

passed with 62marks first attempt, attempted 85% of questions.
All thanks to Mr Moffat for being the greatest tutor in my ACCA journey.

[vincentbegin]

Please ignore me i found it.

[vincentbegin]

Thank you sir!

[vincentbegin]

thank you sir!

[vincentbegin]

Thank you so much Hinaa.
every time when exam is really in 5 days i start to feel very bad and thinking should have been better prepared, and lost courage before anything. I think panic is often bigger obstacle than challenge itself.
Thank you for your good words, it make me feel much better from another panic attack. I wish all the best to you too!

[vincentbegin]

Thank you so much Hinaa.
every time when exam is really in 5 days i start to feel very bad and thinking should have been better prepared, and lost courage before anything. I think panic is often bigger obstacle than challenge itself.
Thank you for your good words, it make me feel much better from another panic attack. I wish all the best to you too!

[vincentbegin]

Dear John, thank you so much for your help!!

[vincentbegin]

Thank you sir!

[vincentbegin]

Thank you sir i think i understand it now.

The target is to aviod breaking covenant, which here is a minimum equity level

Eg: Covenant requires equity minimum 100
Current equity 120 = reserve 20 + shares held by director 60 + shares held by Gupte 40

if company forced to buy back all Gupte shares at par now, then these shares are cancelled and equity = 20 + 60 = 80 and covenant breached.

if director buy 30 from Gupte first, then:
current equity 120 = reserve 20 + shares held by director 90 + shares held by Gupte 10
even company later forced to buyback Gupte the remaining 10, equity will still be at 110, above covenant.

if Reserve drop to 5 due to profit, then equity become:
105 = reserve 5 + shares + shares held by director 90 + shares held by Gupte 10
and company later forced to buyback Gupte the 10, equity will still be at 95, and breach covenant;
therefore, directors now will have to buy at least 30 + another 5 total 35 from Gupte to ensure covenant not breached.
and this is what examiner mean by
“In addition, the amount of shares which the directors would have to purchase would be greater if results, and therefore reserves, were worse than expected”

[vincentbegin]

yes. i m using latest bpp revision kit, and now I found Examiner’s answer is same way as what i understood from your lectures.

Thank you sir!

[vincentbegin]

thank you for the detailed explanation sir! it is very clear now.

[vincentbegin]

thank you for the detailed explanation sir! it is very clear now.

[vincentbegin]

understood, thank you very much sir.

[vincentbegin]

Hi John, appreciate your help with below:
(I read through Moonstar topics on the forums and the technical articles but not sure understood correctly)

Question 1:
The $200m, question mentioned ” Moonstar co should use 90% of the value of the investment for a collateralised loan obligation”

for the remaining 10% of the $200m, is below correct?
-actual funding is done separately, by Moonstar, using other source of finance which not discussed and irrelevant to the question
-To bondholders, this 10% is like a upfront risks compensation for the project

Question 2: is below understanding of the overall question correct?
involvement of bank:
In terms of numbers/calculations only, involvement of bank is the service charges of $0.2m * 10 years only, the 10% in question 1 have nothing to do with bank

SPV purchased the right to receive rental income from Moonstar (but did not purchase the development itself), using funds raised from Bondholders via securitsation.

Moonstar have the ownership of the development, and have control over the development and SPV.

Liability to pay interest and principal of loan notes is under SPV (ultimately/Moonstar) therefore interest rate risks are to be managed.

Question 3: using Moonstar as an example, looks like no value is created for the shareholders of Moonstar at least for the first 10 years

Thank you.

[vincentbegin]

Thank you very much sir.

[vincentbegin]

“they intend to fund the new investment by closing all its town centre and convenience store”
but in the question,these are actually plan of its competitor Dely Co, instead of High K.

My understanding of this Exam Answer :“Interest cover improved in 20Y6 and will improve further if High K makes use of revolving credit facilities” is now:

Regardless the amount of debt needed (increase of reduce), making (right) use of revolving credit facilities, exclusively or together with other forms of debt, will improve interest cover, because of lower interest expenses from the flexibility of drawing amount.

Could you advise if this understanding is correct? Thank you!

[vincentbegin]

Understood. Thank you very much sir.

[vincentbegin]

thank you sir.

[vincentbegin]

Hi John, if using FCFE method is possible, how to calculate cost of equity? question does not provide cost of debt for Foshoro.

Thanks for your time.

[Author]

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