Substantiates the probability to value a leveraged buy-out; and to examine the character and extent of the obligations of a company to its bondholders. Here, the circumstance is a "going private" transaction in Europe, where the funding plan called for the inclusion to the company's balance sheet of a significant quantity of new debt plus a reshaping of the capital structure. Meanwhile the leveraged buyouts had remained used in Europe for numerous years, this was potentially the first LBO done with a company that had publicly traded investment grade debt outstanding.
The escalating debt from the deal would increase the risk to the existing bonds, as well as the bonds' prices would drop appreciably as a result. Pupils can use discounted cash flow techniques to value the LBO. Students must also evaluate the result of the transaction on the existing bonds, and understand the principles regulating contractual responsibilities (and the way in which they differ from fiduciary obligations) towards bondholders (accounting for a business and societal culture outside the USA) in order to decide the best strategy for the private equity buyers.
PUBLICATION DATE: February 12, 2014 PRODUCT #: 214027-HCB-ENG
This is just an excerpt. This case is about FINANCE & ACCOUNTING
Related Case Solutions & Analyses:
Off-Balance Sheet Financing at Big 5 Sporting Goods Corporation
Wealth Management Crisis at UBS (A)
Creating a Culture of Empowerment and Accountability at St. Martin de Porres High School (A)
Suzion Energy Ltd.
MCI
Building the Culture at Agilent Technologies: Back to the Future
Technical Note on LBO Valuation and Modeling
Guiding Professional Accountants to Do The Right Thing
Note on Logistic Regression – Statistical Significance of Beta Coefficients
Retiree Pension and Health Benefits
