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In 2014, Paris Baguette was the largest bakery chain in South Korea with 3,200 stores throughout the country and 178 locations in China, Southeast Asia and the United States. Since 1988, the company had vertically integrated with ingredient suppliers and developed its own food processing capability, giving it considerable control over the value chain. In addition, it had developed an innovative franchise arrangement that allowed for improved cash flow from operations. However, in response to domestic market saturation, intense competition from local and multinational bakery chains and independent bakeries and a recent change in government regulations, its chief executive officer is wondering how best to achieve his goal of operating 6,000 stores in 60 countries worldwide and achieving revenue of KRW4 trillion by 2020. He is also considering whether it would be better to focus instead on improving the profitability of the company’s domestic operations and delay his expansion plans.

In 2014, Paris Baguette was the largest bakery chain in South Korea with 3,200 stores throughout the country and 178 locations in China, Southeast Asia and the United States. Since 1988, the company had vertically integrated with ingredient suppliers and developed its own food processing capability, giving it considerable control over the value chain. In addition, it had developed an innovative franchise arrangement that allowed for improved cash flow from operations. However, in response to domestic market saturation, intense competition from local and multinational bakery chains and independent bakeries and a recent change in government regulations, its chief executive officer is wondering how best to achieve his goal of operating 6,000 stores in 60 countries worldwide and achieving revenue of KRW4 trillion by 2020. He is also considering whether it would be better to focus instead on improving the profitability of the company's domestic operations and delay his expansion plans.

In November 2000, Kohlberg, Kravis, and Roberts (KKR) purchased Rockwood Specialties, Inc., a specialty chemicals company, in a $1.2 billion buyout. Spurred by the favorable market conditions in the first half of 2003, KKR was contemplating refinancing its buyout debt in June 2003. Merrill Lynch, its underwriter, proposed to refinance the earlier funding, in part, with a $375 million issue of senior subordinated notes. Although there had been a favorable interest-rate environment and a strong volume of debt issuance in the first half of 2003, the Rockwood offering still posed some significant challenges. First, it was a first-time issue by a privately held company. Second, KKR's motivation for the offering and the complex financial structure surrounding it had resulted in a preliminary credit rating of Caa from Moody's. Students are asked to evaluate and price the high-yield issue. The case discusses how credit ratings, market conditions, and organizational structure affect bond yields. There is a brief history of how the high-yield market evolved from the mid-1980s through 2003.