Provides an opportunity to explore the nature and degree of responsibility of the company to its bondholders, and raise awareness of problems in the management of contractual obligations and the circumstances in which business leaders would agree to conditions outside the contract. Here, the context of "going private" transaction in Europe, where the financing plan included the addition of the company's balance sheet of a significant amount of new debt and equity restructuring. While the borrowed funds were used in Europe for several years, this is probably the first LBO do with a company that publicly traded investment-grade debt. The increase in debt from the transaction will increase the risk for the company and for the existing bonds, and bond prices will fall significantly as a result. Focuses on how the private share buyers might consider the reaction of the bondholders in the structure of the acquisition, and their possible answer. Students must evaluate the deal and its impact on the bonds, to understand the principles governing contractual obligations (and how they differ from the fiduciary obligations), and accounts for business and social cultures outside the United States. "Hide
by Clayton Rose Source: Harvard Business School 14 pages. Publication Date: November 16, 2007. Prod. #: 308054-PDF-ENG
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