FINANCE

Raising Finance by Issuing Debt Securities

[Writer's initials]

[Dated]

Raising Finance by Issuing Debt Securities

Part One

Financial Analysis of United Utilities PLC

In previous years, United Utilities PLC had a strong and rigid financial position in the market, whereas, recently, statements have shown dull financial management. Sales have fallen to lower levels. Consequently, increasing percentage of selling, general and administrative expenses resulted in fallen net income and revenue. Moreover, Dividend per share increased in recent years on comparative basis. Whereas, when long term trend period and dividend per share of United Utilities was compared with other peers it was lower than others. Lower Dividend per share is a factor i.e. positive, as a small number of companies give DPS to their shareholders (Netter 2003). Whereas, United Utilities Cash Flow PLC is alarmed, for company, the stakeholders were able to increase the revenues of cash in the 2011 and 2012 fiscal year (Donald, 1990, p. 165-194). Generation of GBP 559.08 million from the companies operational activities showed a healthy sign, whereas investment of GBP 498.40 million showed in financing activities, also generated 5.80 Million GBP from the activities relating to finance. The Cash Flow Analysis displayed that the company has issuing bonds capability and that the analysis of the United Utilities PLC i.e. (UUP) 2011 & 2012 fiscal year balance sheet highlights the successful reduction from the Capital debt ratio around 310.20 percent to debt burden 76.84 percent in the fiscal year of 2011 and 12 as highlighted by the company management.

These aforementioned signs show that the firm is capable and financially satisfactory in state of creating the capital by bonds issuance. Moreover, UUP issuing debt viability works in water utilities and wastewater, it is as compared to the society's other parts, considered less weakening. United Utilities financial statements of operational side shows and excellent signs, whereas certain financial risk already geared, company also entertains an excellent credit rating from their peers, this is due to less solid liquidity position. Various advantages for a bond issuer includes the ability to pay less interest rates as compare to other source of financing such as bank providing equivalent maturity. Whereas, investor is concerned it provides benefits by providing higher return as compared to cash investments and the possibility of investment liquidation in secondary market (Kenneth, 1989, p. 771-788).

Bullet Bond: Advantages and disadvantages

It is a bond that, to the investor pays coupons of interest over the bond's life on bimonthly, monthly, yearly or quarterly and has the genuine amount principal is only singly coupon repaid on maturity (Michel, 2001). It is also called as the Vanilla Bond, from the amortizing and security it is much dissimilar and has nothing to repay in interest payment along with principle amount. If the company takes measures to issuance of the bond, it has on the maturity in the future to repurchase on a particular date of the issues bond, whereas making payments of fixed interest rate (Robertrt, 1998, p.187-203).

Issuance of Vanilla Bond can provide multiple advantages to United Utilities Group ...