Saturday, June 6, 2015

UPDATING: Clear(er) Contrasts -- Between Old, And New "Debt Mechanics" -- Corp. Fin., Continued

I'll not spend a ton of time on detailed text, here -- as I think if one compares the below graphic, centered, to the one I made last night. . . one gets the general idea very rapidly.

When a large, cash rich and sophisticated note, commercial paper, or bond buyer (here, Apple) has euros or dollars at the ready, and is well known to the issuer (here, Kenilworth) -- nothing in the US securities laws, as modernized, prevents them from reaching a deal all by themselves -- directly. And Merck is so well known, and its paper so trust-worthy. . . we might ask whether there really is a role for the underwriters and fund managers, here -- other than to provide occasional liquidity. Doubly so, where it is shorter term paper being issued. Merck is not engaging in a "distribution" (as that term is defined in the securities laws), if Apple, Google or Oracle reach out, and ask to invest in the "next" debt deal -- i.e., make a reverse inquiry, and leave an indication of interest, with Merck -- offering to be a buyer.

I have oversimplified several matters here, for clarity, of course -- and in an equity offering, the analysis would differ -- and differ materially.

In any event, now you can see how (and where) the savings pile up, over time, so that both Apple and Merck are likely to have better economic outcomes. Fees are literally eliminated. Do enjoy a cool Saturday, and weekend, one and all.

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