What is an underwriting facility

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a) Bharti Airtel plans to expand its network and prepare for the launch of 5G services. The board hadapproved raising up to ?21,000 crore by issuing additional ordinary shares to its existing shareholders on a pro-rata basis of one new share for each fourteenequity shares of Bharti Airtel. The financial advisers to the corporation have recommended the use of an underwriting facility. Using this information, answer these questions.

(i) What type of issue is Bharti Airtel making to its shareholders? What are the features of this type of issue?

(ii) What is an underwriting facility, and why might Bharti Airtel use such a facility?

b) Rio Tinto Limited has decided to sell its shale coal part of the business by establishing a new limited liability company to be known as Shoal Limited. Shoal Limited will be a listed corporation on the ASX. Rio Tinto and Shoal decide to issue the new shares at $2.65.

(i) Shoal Limited will be a limited liability company. What are the rights and financial obligations of shareholders that purchase shares in the company?

(ii) One year later, Shoal Limited plans to expand its operations and seek to raise capital to do so. The company advisers recommend that the board of directors choose between a private placement or initial public offering. Explain each of these funding alternatives and discuss the advantages and disadvantages of each alternative.

Reference no: EM133074336

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