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Interco has been advised by Wasserstein Perella to reject a $70 per share offer for the company. The case deals with the various types of analysis employed by Wasserstein Perella and allows a discussion of the actions of Interco's board as well as Wasserstein Perella.

A small microbrewer prepares to negotiate a credit facility with its bank to partially fund major expansion.

Describes traditional bank lending product, the role of the lending officer, credit evaluation, and the structuring of credit facilities and loan agreements.

Spreadsheet Supplement for case 290059.

A diversified chemical company must decide whether to sell its basic chemicals division and expand the specialty chemicals division.

Spreadsheet Supplement for case 286109

Penney's assistant treasurer was considering various capital markets issues to finance store modernizations. This case provides the financing terms available to Penney for domestic, current, and zero coupon debt. Eurodollar debt, and nondollar SFr and Yen issues hedged and swapped back to dollar liabilities. Also, Penney is considering using interest rate futures, options, and options on futures to hedge a forthcoming debt issue.

Develops a simple option pricing model which provides an insight into the foundations of the Black and Scholes model. The Black and Scholes model is next introduced and its relationship to the simple option pricing model discussed. Last, the problem of pricing debt options is addressed in the appendix and a debt option model is presented. To be read with Introduction to Options.

Consists of a series of four brief descriptions of the use of financial futures as hedging vehicles: a savings and loan hedging the rollover of three-month money market certificates with T-bill futures, a corporate debt issuer hedging the cost of a future debt issue with T-bond futures, an equity investor hedging a decline in the market, and an example of a company with a natural interest rate hedge on its balance sheet. The examples describe the details of T-bill, T-bond, and S&P 500 stock index futures. Issues addressed include variation margin and basis risk (due to differences in the securities underlying the cash and futures positions, changes in the carry, etc.).

Designed to help students develop an understanding of option contracts and markets.

Presents a description of international equity markets, including comparisons of the U.S., Japanese, and British markets and recent trends toward deregulation of these markets. The decision focus of the case is on the initial public offerings of British Telecommunications stock. The offering was part of a broader privatization program begun by the U.K. government in 1981. The issue was offered simultaneously in four markets: London, New York, Tokyo, and Toronto. The case is written from the perspective of Morgan Stanley, underwriters of the U.S. offering, and focuses on the issues of pricing foreign equities, differences in underwriting practices and securities regulations across markets, structuring an installment sale of equity, and hedging foreign exchange risk on a purchase of foreign equities.

Intended to establish understanding of financial futures.

Describes a series of collateralized mortgage obligations offered by Travelers Insurance. Provides a general description of the life insurance business and the role of life insurance in the capital markets. Also describes a variety of mortgage related instruments, including pass-through securities, pay-through bonds, mortgage-backed bonds, and CMOs; and outlines trends in the securitization of mortgage assets. Background on the pricing of mortgage securities and models of prepayment on mortgage instruments is included. The protagonist, an insurance company portfolio manager, wonders why Travelers is issuing this security (and retaining one class of the bonds) and considers purchasing one or more of the bond classes offered. The student should understand the yield curve arbitrage driving the issuance of CMOs, the reason Travelers undertook the transaction, and the interaction of the primary and secondary residential mortgage markets.

Spreadsheet Supplement for case 286073.

Describes uses of foreign currency swaps and development of both interest rate and foreign currency swaps market. Emphasis on calculation of all-in costs using foreign currency swaps and conversion of basis points in one currency to basis points in a different currency.

Describes the operation of foreign exchange markets, including bid-offer spreads, cross rates, reciprocal rates, and forward rates. Provides several examples to demonstrate calculation of outright forward rates using discount and premium points quoted in the London Financial Times. Other examples demonstrate interest rate parity, and hedging foreign debt using long-dated forwards.

Spreadsheet Supplement for case 286067

An assistant treasurer at J.C. Penney is looking at various alternatives for financing the company's $2.5 billion store expansion and modernization program. The case provides a listing of different ways/capital markets issues to obtain this financing. Designed to be used as an introduction to capital markets.

Describes the market for high-yield, or "junk," bonds and includes summaries of academic research on the risk/return characteristics of high-yield securities. Describes the role of Drexel Burnham Lambert in the primary and secondary markets for high-yield debt. Decision focus is on a public offering of four high-yield securities issued by Metromedia Broadcasting Corporation in November 1984. The offering was used to refinance bank borrowings incurred in connection with Metromedia's June 1984 leveraged buyout. The securities offered included Serial Zero Coupon Notes due 1988-93, Senior Exchangeable Variable Rate Debentures due 1996, 15 5/8% Senior Subordinated Debentures due 1999, and Adjustable Rate Participating Subordinated Debentures due 2002. Proceeds from the offering totaled $1.2 billion.

Spreadsheet Supplement for case 286044