Saizeriya and the Use of Foreign Currency Coupon Swaps: Was This for Hedging or Speculation? Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Home >> Human Resource Cases >> Saizeriya and the Use of Foreign Currency Coupon Swaps: Was This for Hedging or Speculation?

Saizeriya Co. Ltd was taken over by Yasuhiko Shogaki in the year 1968, and from that time the restaurant had an objective to supply healthful and delicious Italian meals at affordable costs for everyone. On 9 December 2008, Shogaki made a public announcement that was stunning - that the business had incurred a loss of JPY15 billion caused by the usage of foreign currency coupon swaps. He further pronounced that because of such transactions (including trading in derivatives to hedge against foreign exchange risks), the Italian restaurant chain operator might fall into the red with regard to the group net earnings related to the year through August 2009.

Shogaki disclosed that Saizeriya signed deals of derivatives with the BNP Paribas Securities Ltd in Japan in the month of October 2007 to purchase Australian dollars (A$) that the restaurant needed to import the food from that state. Following the disclosure, Saizeriya's stock price went limit-down on 10 December 2008 as investors hastened to discard the stock. Investors and some directors questioned this disclosure. Shogaki subsequently had to choose whether the business should continue hedging (such as with swaps), regardless of the very fact that Saizeriya had just suffered enormous losses from similar transactions. The business could enjoy yen appreciation merits for the payments in A$ if no hedging was arranged by Saizeriya.

Saizeriya and the Use of Foreign Currency Coupon Swaps Was This for Hedging or Speculation

PUBLICATION DATE: March 26, 2014 PRODUCT #: HK1037-PDF-ENG

This is just an excerpt. This case is about LEADERSHIP & MANAGING PEOPLE