Case Studies in Structured Finance

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Presentation transcript:

Case Studies in Structured Finance Sealed Air Ian Giddy August 2000

Questions : 1. Why did Sealed Air undertake a leverage recapitalization ? Do you think that it was a good idea ? For whom ? 2. How much value was created ? Where did it come from ?

Organizational effects of leverage Too little leverage -waste of resources inside organization Inefficiency Too much scrap, capital expend., R&D Too much leverage -pushed to generate cash at the expense of value -too little inventory -not enough credit for customers - skimping on quality, capital expend, R&D

Sealed Air's changing competitive environment They had traditionally neglected manufacturing in favour of marketing. - able to do this because of a lack of competition About a year before the recap, they launched a program of manufacturing excellence.

What to do with the cash ? Understanding the Special Dividend Transaction The Effect of the Recap on Firm Value and Performance Change in Shareholder Value over the year following the Recap

High Leverage and Manufacturing Excellence Organizational Effects of Leverage - already in Changes in Organizational Priorities and Compensation Turnovers in the Company's Investor Base Implications of the case