The Shocking Demise

of Mr. Thorndike
WM 69
Presented By:
Arie Frederik
Faula Iman Sitompul
Harish Adrian Riyanto
Iestin SB Tamba
Louisa Zephania Lukas
Mr. Rupert
Thorndike,
autocratic
CEO of
Thorndike Oil,
found dead
Case Summary
The companys capital structure as follows:
5% debentures:
$250 million face value
Mature in 10 years with 12% yield
Stock:
30 million shares
Closed at $9 a share the day before the murder
10% subordinated convertible notes:
Mature in 1 year and are convertible at any time at a
conversion ratio of 110.
Priced at 5% more than their conversion value the day
before the murder
Case Summary
Other information:
Before the murder, Mr. Thorndike was offered the
following:
All common stock would be bought off at $10 a share
All debts issued would be paid off at face value
Holders of convertible notes could choose to convert
their shares
Case Summary
Case Summary
In $m 5% Debentures
(Face Value)
Shares of
Stock
10% Convertible Notes
(Face Value)
Doris 4 1.2 0
John 0 0.5 5
Patsy 0 1.5 3
Who stood to gain the
most from his death?
5% Debentures Before the Murder
Year
Annual Cash Flow
(5% x $250 million)
PV
(CF / (1+0.12)^t)
1 12,500,000.00 11,160,714.29
2 12,500,000.00 9,964,923.47
3 12,500,000.00 8,897,253.10
4 12,500,000.00 7,943,975.98
5 12,500,000.00 7,092,835.70
6 12,500,000.00 6,332,889.01
7 12,500,000.00 5,654,365.19
8 12,500,000.00 5,048,540.35
9 12,500,000.00 4,507,625.31
10 262,500,000.00 84,517,974.61
Total
151,121,097.00
0.604
PV at 12% of
the 5%
coupon for 10
years, plus
repayment of
face value at
year 10, is
60.4% of the
$250 million
face value, or
$151.12
million

5% Debentures After the Murder
$250 million face value, all paid off
Gain in market value of 39.6% (100% 60.4%)

Stocks Before and After the Murder
Before: $270 million ($9 per share)
After: $300 million ($10 per share)
$1 Gain in market value ($10 - $9)

Convertible Notes Before and After
the Murder
Before:
$990 per $1,000 note (110 x $9)
The bonds were trading at 1.05990 = $1,039.50
103.95% of face value
After:
$1,100 per $1,000 note (110 x $10)
110% of face value
Thus, the notes increase by 6.05% of face value
(110% 103.95% )
Case Solutions
Before After Gain in Value
Debentures $151.12 million
(60.4% of face
value)
$250 million
(100% of face
value)
39.4%
(100% - 60.4%)
Common Stock $270 million
($9/share)
$300 million
($10/share)
$1
($10 - $9)
Convertible
Notes
103.95% of face
value
110% of face
value
6.05%
(110% -
103.95% )
Case Solutions
In $m Doris John Patsy
5% Debentures
(Face Value)
1.584
(0.396 x 4)
0 0
Shares of Stock
1.2
(1 x 1.2)
0.5
(1 x 0.5)
1.5
(1 x 1.5)
10% Convertible
Notes
(Face Value)
0
0.3025
(0.0605 x 5)
0.1815
(0.0605 x 3)
Total 2.784 0.8025 1.6815
Doris gains the most from Thorndikes death and
receives $2.784 million in total