Mortgage for $ 24.8 million of Series B Preference stock would dilute the benefit of the Series A Preference stock to the four bond issues which are to receive Series A Preference stock and increase the amount of the Series A which is prior to Series B Preference stock.
D. Impact on Redemption
1. ADP proceeds satisfy securities prior to A and B Bonds first. Thereafter, ADP proceeds are applied to A Bond interest, A Bond principal, B Bond interest, and B Bond principal, in that order.
2. Beginning with the "Revised Eleven-Year Cash Flow Projections" (Doc. No. 14434), determine the effect of issuing $ 79.36 million in additional A Bonds.
3. Principal of A Bonds outstanding on December 31, 1980, is $ 39.3 million ($ 344.2 million less $ 304.9 million redeemed). Add $ 79.36 million in A Bonds for a total of $ 118.6 million.
4. Apply cash flow to the $ 118.6 million.
5. In 1984 and thereafter the accruing interest would be $ 3.22 million per annum. The B Bond interest payment shown in the cash forecast is from Pennco dividends. Presumably, the A Bond interest would be satisfied from Pennco dividends.
6. Net result,.$ 46.08 million in A Bonds outstanding as of 1987, with no interest due.
7. Reduce the $ 223.1 in B Bonds shown on the cash flow by $ 43.8 million, so that the amount issued would be $ 179.3.
8. The B Bond interest payments in 1981 and 1982 would not be affected by the additional A Bonds. In 1983, there would be no B Bond interest payment or B Bond redemption. The B Bond interest application shown in 1984 through 1987 would be reduced by $ 3.22 million to service the A Bonds.
9. Calculation of the accrued interest is complicated, but it is estimated that as of December 31, 1987, $ 179.3 in B Bonds plus $ 34.39 in B Bond interest will be due. The total principal and interest of $ 213.69 compares with $ 204.6 shown on the cash flow. The small amount of the variance is attributed to the reduction of $ 43.8 million in B Bonds issued.
E. Effect of A Bond Overhang
Even if the $ 46 million in A Bonds are not satisfied by Valuation Case proceeds, the burden on the reorganized company would be ameliorated by the fact that unsatisfied A Bonds are extended for 10 years and satisfied by 10 annual installments.