Credit enhancement through financial engineering: Freeport McMoRan's gold-denominated depositary shares

• 成果类型: Article
• 署名作者: Chidambaran, NK; Fernando, CS; Spindt, PA
• 署名单位: Tulane University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(01)00051-4
• 发表日期: 2001
• 页码: 487-528
• 关键词: Risk management; credit enhancement; gold-linked; hybrid securities

摘要

In 1993 and 1994, Freeport McMoRan Copper and Gold issued two series of gold-denominated depositary shares to finance the expansion of its mining capacity in Indonesia. The pricing of these securities reflected their enhanced credit quality, which arose from the positive correlation between the value of the firm and the value of the securities. This feature of the securities effectively bundles a gold hedge with financing. A bundled hedge avoids wealth transfers to senior bondholders, since junior bondholders can effectively net their bond-related claims on the firm against their hedge-related liability to the firm. Such securities cannot be replicated by conventional hedging strategies, and they also mitigate the asset substitution problem. (C) 2001 Elsevier Science S.A. All rights reserved.