Roche Prep Sheet:What coupon rate should Roche offer for its bonds so that they can be sold at...

Question

Roche Prep Sheet:What coupon rate should Roche offer for its bonds so that they can be sold at par?1.Do you agree with the timing of the bond offering? Is it a ‘good time’ to issue?2.Do you anticipate that the offering will affect Roche’s bond rating? If so, in what way?3.How can weestimatethe yield investors will require on a bond? What are yourestimatesof investors’ required yields for the 5-year, 10-year, and 30-year US dollar bonds?a.First estimate the yields for the Roche bonds using the information in Exhibit 6b.Nest estimate yields based on information in Exhibit 11 (you can assume all bonds have a par value of $100)c.Which estimate do you trust more? Why? How would you explain to someone unfamiliar with credit markets why these estimation techniques are valid?4.What is your estimate of investors’ required yields for the 7-year Euro denominated bond? Can you just use the same techniques as you did in Question 3?

Tanmoy · Accepted Answer

Roche		4
ROCHE
Table of Contents
Introduction	3
Analysis	3
Answer 1	3
Answer 2	3
Answer 3	4
Answer 4	5
Appendix	6
References	8
Introduction
	Roche is a pharmaceutical company which tries to enhance the lives of the people through its products and services. The company focuses on treatment of infectious diseases and immunology, oncology, neuroscience and ophthalmology. The company has the potential to transform science into therapies for minimizing the human sufferings and increase the longevity of the people.
Analysis
Answer 1
	Roche issuing bond is good strategy but cannot be a good strategy for various reasons. The proposed Roche bond is the largest bond offered in the US pharmaceutical industry. It’s the uncertainty in the market combined with volatility which can impact the price of the bond. It can also impact the rate of interest and coupon rate of the bond. In order to correctly price the bond and legal procedures there is high cost incurred for hiring an investment banker. 
	The near time may be difficult but the issuing of bond can be fruitful for Roche in the future after a time the market is stabilized. Roche was able to capitalize with good positioning when the economies were down and was able to acquire more market share against the competitors.
Answer 2
	The timeframe must be analyzed for discussing the advantages and disadvantages of the bond offered by Roche. This offering will impact the rating of Roche bond negatively in the short run.

Roche Prep Sheet: What coupon rate should Roche offer for its bonds so that they can be sold at par? 1.Do you agree with the timing of the bond offering? Is it a ‘good time’ to issue? 2.Do you...

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