The two PIK reset issues differed in essentially two ways: Exhibit 5 gives projections of RJR Nabisco’s operating results for the years — In recent times, many companies had been repurchasing their “junk” securities: Perold as the basis for class discussion rather that to illustrate either effective or ineffective handling of an administrative situation. Roberts, then 50, 32, and 33 years old, respectively. Same interest rate provisions as on the Senior Converting Debentures described above.
Food sales were forecast to grow at 8. The raison d’etre of the Bank Credit Agreement was primarily to ensure that the banks were paid off ahead of anybody else; exceptions to this principle were few. The reset provision is substantially identical to that of the Senior Converting Debentures described above. 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. If the conversion occurs, the bondholders forego the right to the interest accrued on the debentures.
Callable at a small premium to par on any interest payment date.
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Interest rate variable at the greater of 50 basis points over the IRN rate see above or an increasing spread over time over the rate on the 7 year treasury note. If Holdings’ financial advisors, on the one hand, and Dillon and Lazard, on the other hand, are unable to agree on the Fixed Rate within three business days, Soolution financial advisors, on the one hand, and Dillon and Lazard, on the other hand, shall appoint pot independent nationally recognized investment bank to determine the Fixed Rate and such determination by such bank shall be final.
Fees charged on other large deals as a percentage of the total transaction in parentheses were: LIBOR plus basis points. Exhibit 5 also gives a cash flow analysis based on the above projected operating results. Increasing Rate Notes due Studj, and George R.
The raison d’etre of the Bank Credit Agreement was primarily to ensure that the banks were paid off ahead of anybody else; exceptions to this principle were few. Under pressure from their constituencies, university endowments and public pension funds were beginning to divest themselves of tobacco securities. Many participants in the fund had invested money with Nbisco since the beginning of the decade.
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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 outstanding. If they did not recover and the reset proved infeasible, KKR could then try to negotiate with the bondholders and banks, or seek Chapter 11 protection, or rjrr. Failing such a reset, the bonds would become due and payable almost immediately.
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. The latter PIK bonds did not have a reset feature, however.
Payment of such fees began soon after the fund closed and were intended to continue on uninvested funds for a six-year commitment period. Assumed interest rates are consistent with the operating projections.
And this KKR accomplished with a professional staff of fewer than two dozen.
The relatively optimistic outlook for RJR’s tobacco businesses was not without considerable uncertainty. 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.
With respect to the latter, covenants effectively prevented any course of action other than the raising of external funds to retire the loan. Kohlberg had done his first LBO in Food sales were forecast to grow at 8. First, the firm could try to raise external funds and repurchase all or a portion of the PIK reset bonds. Cash and cash equivalents Accounts and notes receivable Inventoriesc Prepaid expenses and excise taxes Net assets available for saled Total current assets Property, plant, and equipment, net Trademarks and Goodwill, net Other assets and deferred charges Liabilities and Stockholders’ Equity Current liabilities: Plaintiffs’ arguments, by and large, fell into two general camps: On or prior to April 28,RJR must set a fixed rate to maturity on the debentures.
As noted above, cigarette shipments in the U. Exhibit 1 details the composition of long-term debt, including initial amounts issued with respect to buyout-related debt and amounts outstanding on March 31, The reset bonds came into being as the “cram-down” securities in the RJR buyout.
With a “substantially equivalent” opinion from its financial advisors, the board felt free to evaluate the offers based on other considerations. Subordinated Discount Debentures due 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 Navisco U. Indentures required that on or before April 28,RJR reset the rate so that the bonds would trade at par see Exhibit 1. Roberts, then 50, 32, and 33 years old, respectively.
Faced with an unreceptive public market, KKR withdrew the debt offering and began discussions with RJR’s lending banks.