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  • Debt Policy at UST - Study Questions

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    Adeel_Akram_Ch_9271
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    This document is a case study from Harvard Business School about a potential leveraged recapitalization by UST Inc. involving $1 billion in new debt to finance a stock repurchase. It poses several questions for analysis: 1) What are the primary business risks and attributes of UST Inc. from a bondholder's perspective? 2) Why is UST Inc. considering changing its historically conservative debt policy? 3) Should UST Inc. undertake the $1 billion recapitalization and what would be the marginal effect on its value, assuming the debt is perpetual? 4) Could the recapitalization hamper UST Inc.'s ability to pay future dividends given it has paid

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    This document is a case study from Harvard Business School about a potential leveraged recapitalization by UST Inc. involving $1 billion in new debt to finance a stock repurchase. It poses several questions for analysis: 1) What are the primary business risks and attributes of UST Inc. from a bondholder's perspective? 2) Why is UST Inc. considering changing its historically conservative debt policy? 3) Should UST Inc. undertake the $1 billion recapitalization and what would be the marginal effect on its value, assuming the debt is perpetual? 4) Could the recapitalization hamper UST Inc.'s ability to pay future dividends given it has paid

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    1K tayangan1 halaman

    Debt Policy at UST - Study Questions

    Diunggah oleh

    Adeel_Akram_Ch_9271
    This document is a case study from Harvard Business School about a potential leveraged recapitalization by UST Inc. involving $1 billion in new debt to finance a stock repurchase. It poses several questions for analysis: 1) What are the primary business risks and attributes of UST Inc. from a bondholder's perspective? 2) Why is UST Inc. considering changing its historically conservative debt policy? 3) Should UST Inc. undertake the $1 billion recapitalization and what would be the marginal effect on its value, assuming the debt is perpetual? 4) Could the recapitalization hamper UST Inc.'s ability to pay future dividends given it has paid

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    dari 1

    SOLVAY BUSINESS SCHOOL UNIVERSIT LIBRE DE BRUXELLES

    PROF. HUGUES PIROTTE SOLVAY BUSINESS SCHOOL UNIVERSIT LIBRE DE BRUXELLES 50 AV. F. D. ROOSEVELT, CP145/1 1050 BRUXELLES

    Debt Policy at UST Inc. (HBS # 200-069)


    Study questions
    This case covers a major change in capital structure via a debt-financed stock repurchase program.

    Questions:
    1. 2. 3. What are the primary business risks associated with UST Inc.? What are the attributes of UST Inc.? Evaluate from the viewpoint of a bondholder. Why is UST Inc. considering a leveraged recapitalization after such a long history of conservative debt policy? Should UST Inc. undertake the 1$ billion recapitalization? Calculate the marginal (or incremental) effect on USTs value, assuming that the entire recapitalization is implemented immediately (January 1st , 1999). a. Assume a 38% tax rate. b. Prepare a pro-forma income statement to analyze whether UST will be able to make interest payments. c. For the basic analysis, assume the $1 billion in new debt is constant and perpetual. Should UST alter the new debt via a different level or a change in the amount of debt through time? 4. UST Inc. has paid uninterrupted dividends since 1912. Will the recapitalization hamper future dividend payments?

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