The financial uncertainty in Hong Kong and Asia from mid-1997 to mid-1998 was caused in part by the Asian flu and the return of Hong Kong to the People's Republic of China. A large North American-based insurance company was faced with the decision of managing its Asian assets in light of this uncertainty, especially the possible breaking of the peg between the Hong Kong dollar and the U.S. dollar. As the vice-president of capital markets at Manulife Financial contemplated what strategy he would recommend to the senior executive group, he considered the concepts of fixed/pegged exchange rates and the use of different strategies to manage the risks, as well as the potential profit opportunities that may arise when a fixed/pegged exchange rate is under attack and may break.
An innovative financial services provider is struggling to arrive at a fixed interest (or SWAP) rate needed by its client. The client's new project would take five years to reach capacity, at which time debt repayments would begin. Hence the client needed to lock in interest rates for the first 10 years of the project. To arrive at a price, the financial services provider planned to start with the zero coupon rate bond yield curve, testing various points along the curve. (The teaching note for this case consists of a PowerPoint presentation. A Microsoft Excel spreadsheet is also available for use with this case, product 7A99N034.)
Clearnet is a rapidly growing wireless communications company in the midst of a major capital investment and marketing program. The vice-president/chief financial officer must make an immediate decision involving how much Clearnet should try to raise from the public, when, what sort of instrument, and where? Among the alternatives are equity and high yield debt issues in Canada versus U.S., and cash-pay versus discount notes. Two years after its start-up, Clearnet successfully launched its Mike network, an enhanced specialized mobile radio digital network. In addition, Clearnet was awarded a national personal communications service license and was in the midst of a major network build-out program and organizational expansion in preparation for launching personal communications services the following year to be directed at the mass consumer market.
Four Seasons Hotels and Resorts Inc. had grown significantly during the past 20 years, and most recently, had fundamentally changed the nature of its business from hotel ownership to hotel and resort management. The focus of the case is on what more could be done to enhance the value of the firm. Should an equity offering be undertaken? Was the timing right? Who should be the underwriters? What should be the criteria for selecting one underwriter over another? Should it be a global equity offering or should it be kept in Canada? Would debt refinancing be a better alternative? What would be the advantage of one over the other? Who should be the target buyers? What would the impact of each choice be on shareholder value?
The vice president of finance was reviewing the corporation's financial situation in preparation for the forthcoming board of directors' meeting. Key items on the board's agenda included Torstar's dividend policy and share repurchase strategy, along with Torstar's ability to acquire strategic investments and to maintain capital expenditure requirements. The case focuses on the optimal utilization of excess cash flow.
Wayne Adlam, head of equity capital markets for CIBC Wood Gundy Securities Inc. (Wood Gundy), sat at his desk contemplating placing a value on the equity units of the Legacy Hotels Real Estate Investment Trust. Wood Gundy and RBC Dominion Securities Inc. had been given the mandate to co-lead manage Legacy's Initial Public Offering (IPO). Legacy planned to use the proceeds of its IPO along with funds raised in a concurrent $300 million subordinated debt offering to invest in 11 hotel properties located in major business centres across Canada. The hotel properties would be acquired from CP Hotels.
Following a five-year search for a profitable, technologically-driven branded consumer products business with international growth potential, The Gillette Company announced its intended acquisition of Duracell. The focus of the case is on assessing the risk of Duracell and the measurement of a discount rate for valuation. The case is particularly rich because of the changing risk profile of Duracell.
On Wednesday, February 2, 1994, Ted Rogers, president and CEO of Rogers Communications (RCI), announced that a strategic merger was being sought with Maclean Hunter Limited (MHL). Over the course of the last several weeks, a private company controlled by Mr. Rogers had purchased a block of stock representing approximately 8 percent of the shares held by the public. The focus of the case is to formulate a presentation to RCI's board of directors, which discusses the price, strategy and terms of a planned offer to acquire all remaining MHL shares.