RJR NABISCO CASE STUDY PPT

Roberts, then 50, 32, and 33 years old, respectively. They played it clever and with more intuition. As a third possibility, KKR could try to renegotiate the terms of the reset bonds or give holders the opportunity to exchange their bonds for equity and other securities. Activities of Special CommitteeSummary of final bids substantially equivalent: To participants in its funds, KKR charged 1. He can completely implement his philosophy. It is like a catch

With a “substantially equivalent” opinion from its financial advisors, the board felt free to evaluate the offers based on other considerations. In , it was worth to respect that getting a M. After the equity of Holdings, the most junior securities were the Senior Converting Debentures followed by the Exchange Debentures. However, Nabisco usually give people a healthful impression. These bonds carried a provision which stipulated that the interest coupon would be reset in December, so that the bonds would trade at slightly above par.

With this approach we discount the capital cash flows using the rate of return on assets. KKR’s strategy for servicing this debt rested on asset sales and improved internal cash flow.

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The Relative Pricing o The state district court judge in Texas agreed with plaintiffs’ contention that the LBO was a fraudulent scheme designed to shield the company from asbestos litigation. Operating Projections Historically, RJR Nabisco’s tobacco operations provided just over half of rnr company’s sales and about three fourths of its profits.

There are smaller differences between the KKR value and the management value. Exhibit 5 gives projections of RJR Nabisco’s operating results for the years — Callable in at In March,there were 31 product liability cases pending against RJR; compared to 97, 69, and 48 such cases at the end of, andrespectively.

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He got the bachelor of commerce degree in University of Manitoba and got M. Reportedly, KKR did not think the plaintiffs would prevail. Terminal ValueResults will depend on the growth rate assumption. Callable at a small premium to par on any interest payment date.

rjr nabisco case study ppt

Beta of ease is given at 0. At the time, the company was embroiled ppf numerous asbestos-related product liability lawsuits stemming from the manufacture of asbestos building materials by the company’s Celotex Corporation subsidiary. They need to avoid argument about their production is harmful for people.

RJR Nabisco case study

Role of a corporate governance system that encourages value-enhancing decisions. So in this phase, company needs to consider about cutting cost. Thus, the restrictive covenants of the bond and note indentures only assumed relevance upon expiration of the Credit Agreement which remained in effect as long as there was bank debt stuy.

rjr nabisco case study ppt

Nordic Journal of Comp The two PIK reset issues differed in essentially two ways: There are several questions to these CEOs. However, this was one of KKR’s least attractive alternatives, since its strategy was to develop rather than liquidate RJR’s major food businesses.

rjr nabisco case study ppt

Same interest rate provisions as etudy the Senior Converting Debentures described above. Nabisco was an American conglomerate selling tobacco and food products. Pays at maturity.

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Faced with an unreceptive public market, KKR withdrew the debt offering and began discussions with RJR’s lending banks. These projections are in the mid-range of those of Wall Street analysts who were closely following the RJR situation.

And this KKR accomplished with a professional staff of fewer than two dozen. A second alternative was to raise internal funds for a bond buyback through the sale of additional assets—the most marketable of which were believed to be RJR’s U. Amounts shown were not necessarily outstanding simultaneously. Many participants in the fund had invested money with KKR since the beginning of stjdy decade. Conceivably, with an external funds infusion, it might not even be necessary to repurchase csae of the bonds, since a strengthened balance sheet might give sufficient boost to their values.

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They advertise their caae and foods are good for public health. Why we want that company? Assets that are planned to be sold are included at estimated fair market value under “Net assets available for sale.