-84-
were attributable primarily to its amortization of intangible
assets and deferred financing costs (the 1992 loss also was
attributable to a one-time writeoff of $2,953,646), and it had
reported significant net income for 1992. It also was timely
paying interest and principal on its senior debt, and it had
recently restructured its debt and equity as discussed supra pp.
81-82 so as not to default on debt and to redeem other preferred
shares.
In addition to the risk that Sterling would not redeem its
series A preferred stock timely, however, is the risk that
Sterling would not redeem its series A preferred stock for the
contractual amount referenced in the certificate of designation
but would redeem those shares at a lesser amount.52 We did not
take this risk into account in Trompeter I. Upon remand, we now
believe that our 4-percent discount rate undercompensated the
hypothetical buyer for this risk. In lieu of the 4-percent
discount rate that we applied in Trompeter I, we now believe on
the basis of the record before us that the more appropriate rate
is an annual rate of 12.5 percent. This 12.5-percent rate is
52 We note but do not rely upon the fact that Sterling
eventually did such a thing when, after the applicable valuation
date, it agreed to redeem its series A preferred stock at
approximately $1,270.21 per share ($1,947,845 redemption price
paid to the Trust/1,533.482 redeemed shares). We also note but
do not rely upon the fact that this lesser amount reflected the
payment of 5 percent interest in lieu of the accrued dividends
which were payable under the certificate of designation.
Page: Previous 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 NextLast modified: May 25, 2011