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What share of the company equity must the owners offer

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Question - The market value of the non-leveraged assets in Company X is (t = 0) DKK 273 million. kr., if the company continues its current operations. However, the company has to t = 0 an outstanding debt of DKK 296 million. DKK which is due for payment now.

The company has no other debt. If the company decides to go bankrupt, the bankruptcy costs will be DKK 27 million. To avoid bankruptcy, the owners of the company are considering offering the debtors to convert their debt to a share of the equity in the company if it continues its operations. It's seen away from tax.

Required - What share of the company's equity must the owners offer as a minimum the debtors for that they will accept the conversion of their debt into equity figures?

Reference no: EM133088792

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