About the Course
This
two-day course offers an insight into the asset restructuring and funding
changes needed to survive and thrive in a challenging credit market. The course
leader, Prof. Ian Giddy, will demonstrate how any company can benefit from
private, active ownership, management incentives and the discipline of debt
financing. Working on actual LBO deals and case studies, participants will learn
how companies can adapt to the credit crisis and emerge stronger. The course
offers details on how to best use sources of leveraged finance, including
subordinated and equity-linked mezzanine instruments, applicable to emerging
markets as well as the hard-hit developed countries.
Participants will Learn
- Intervention by the private equity
owner: integrating corporate
goals into finance
- How to implement the "five key
disciplines of corporate finance"
- How to manage your company's gearing, credit
quality, and liquidity
- Financial restructuring: how to use
subordinated, mezzanine and equity-linked financing instruments
- Business restructuring: when growth through
acquisitions pays off - and when asset sales make sense
- Ownership transition -- when and how to exit
a business.
Materials and Resources
Workshop participants will be provided with
a package of materials and web links, useful for developing restructuring and
financing proposals. These include pertinent articles, case studies based on actual
deals, and sample spreadsheets. Pre-Course Reading
Course Outline
Topics
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Resources
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| Day
1
Tough Times: Employing
the Disciplines of Private Finance
- Private equity today: the analytic task of
evaluating portfolio companies
- Identify areas where they can do best and
discarding other areas
- Case study: Goldfield
Corporation.
What problem? What solution?
- Restructuring debt, equity and assets to create corporate value
- Look
at the fundamental characteristics of the business before looking at the
finance
- What
are the strong and weak points of the company?
- The five
principles of corporate financial restructuring: investments, acquisitions,
financing, payback and risk management
- Managers’
vs. shareholders’ vs. lenders' interests: the agency
problem
- Strategy and finance: capital funding
choices for corporations
- Matching corporate finance to funding
choices
- The leverage flowchart
- Case study:
Taca Aviation.
Acquisitions or asset sales? Lease finance, corporate debt or deleverage?
- Restructuring incentives: making management
equity sweat – and making it rich
- Interactive: what are we doing right? What
will we do differently?
Managing Financial Risk
- Can the company’s CFO predict currencies,
rates or commodity prices?
- Is the company a business – or a bet?
- Dealing with commodity price risk: Susan Oil & Gas (Belize)
- Dealing with currency risk: Oligarch Foods (Russia)
- Case study: Houston Natural Gas
Exploration.
Should management accept Jana’s recommendation to forego acquisitions and
do a share buyback?
Restructuring the
Business
- Acquisitions: creating corporate value -- or
destroying it?
- How a well-run company evaluates
acquisitions
- Examples: ISS
and Berkshire
- M&A synergies: revenues, costs or
control? (A flowchart)
- Asset sales and corporate divestitures: when
and why?
- Case study: The
New York Times.
Using sale-leaseback to sell your headquarters building
- Selling a business division: opportunities, methods
and valuation
- Case study: John Deere breakup. Should this company sell its finance division?
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Presentations
Private Equity
Financial Risk
Business Restructuring
Case studies
Goldfield
2009
Taca Financing
Susan Oil
Oligarch Foods
Houston Exploration
Articles
Strategic Finance
Making
Capital Structure Support Strategy
What
Public Companies Can Learn from Private Equity
Corporate Hedging
Spreadsheets
optimal_wacc.xls
breakup.xls
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Day
2
Restructuring the
Finance
- Too little cash -- and too
much
- The logic of
private equity and leveraged buyouts
- Too much leverage – and too
little
- “Equity is a cushion; debt is a
sword”
- Case study: Nukem Security
Services. How can one employ leverage to
effect a management buyout of this company?
- Deleveraging: cost-benefit
evaluation
- Case study: Asia Aluminium. A debt repurchase
proposal
- The leverage
flowchart
- Debt-for-equity swaps and exchange offers
- Case study: Tradeshow
Planning.
How did this company restructure its debt and return to financial health?
- Managing credit and liquidity in a
"credit crunch"
- Role
of Mezzanine Finance: where does it fit into a company's financing
structure and restructuring solutions?
- Explanation
of mezzanine and equity-linked financing instruments
- Subordinated
debt, convertibles and warrants
- Case study: deCode Genetics.
A life sciences company faces a refinancing crisis
- Performance-linked participation debt: an
alternative form of mezzanine
- Setting targets and linking payout to
performance
- Discussion of appropriate linkage: turnover,
cash flow or profit?
- The
Mezzanine Matrix (the when and why of subordinated and equity-linked
finance)
- Building
Materials case study. Recession-related mezzanine management
Restructuring
the Control
- Ownership dispute, transition
and exit: financial choices
- The option of equity investors'
recapitalization
- Case study: Sanjay Cement. How
do we fix the control and regain value?
- Giving up control: at what
price? What is the company worth?
- What are the exit
options?
- Case study:
Restructuring Ownership of American Apparel
- Conclusion: when to buy; when to
restructure; and when it’s time to sell
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Presentations
Restructuring Finance
Restructuring Ownership and Exit
Case studies
Asia Aluminium
Tradeshow Plannning
DeCode
Genetics
Sanjay Cement
American Apparel
Articles
Lenders Squeeze Borrowers
The Predators
Spreadsheets
lbo_capacity.xls
lbo_deleverage.xls
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Additional Resources
Books
Lessons
from Private Equity Any Company Can Use by Hugh Macarthur and Orit Gadiesh
Distressed
Investment Banking - To the Abyss and Back by Henry F. Owsley
Distress
Investing: Principles and Technique by
Martin J. Whitman
Articles
Introduction
to cost of capital
Mezzanine
Finance Explained
Distressed Exchanges
Useful Links
fitchratings.com (leveraged loan analysis)
bondsonline.com (corporate bond
spreads)
damodaran.com
(corporate data and industry ratios)
About the Instructor
Dr. Ian
Giddy,
born in South Africa, has taught finance at NYU, Columbia, Wharton,
Chicago and
in over 45 countries worldwide for the past three decades. He was
Director
of
International
Fixed Income Research at Drexel Burnham Lambert from 1986 to 1989. The
author of more than fifty articles on international finance, he has
served
at the International Monetary Fund and the U.S. Treasury and has been a
consultant with numerous corporations and financial institutions in
North and South America, Europe, Asia, the Middle East and Africa. As a lecturer, banker and consultant he has been involved in the growth of the
structured finance market and private equity in the USA, Europe and Asia. He currently serves as the independent Risk Manager
for Credit Renaissance Partners, an investment group. He is the author or
co-author of The International Money Market, The Handbook of
International Finance, Cases in International Finance, Global
Financial Markets, Asset Securitization in Asia and The Hudson River Watertrail
Guide, as well as many short articles on finance and
conservation biology. He and his wife are the founders of Cloudbridge, a nature
reserve in Costa Rica.
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