Discuss the level of gearing of the group and evaluate whether there is sufficient operating cash flow to support more or less debt at the average interest rate that the group currently pays
b. The advantages and disadvantages of issuing a fixed rate bullet bond. How a bullet bond is priced,
how a credit spread involved is. What are the risks and costs to the company of issuing such debt?
c. Should the bond be callable or puttable? Explain what is meant by these terms and how does it
affect the pricing of the issue.
d. Should United Utilities PLC consider a convertible bond issue? What are the mechanics of convertible bonds and what are the cost and payoff implications to both United Utilities PLC and the Investors?
e. Should United Utilities PLC consider an inflation linked bond? What are the mechanics of inflation linked bonds and why might this be very suitable for United Utilities PLC. What would be the cost and payoff implications to both United Utilities PLC and the Investors?
f. From you’re your discussion points so far, write a brief on the advantages and the disadvantages of investing in utility companies. You should make reference to issues concerning the regulation of such companies in the UK.
