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Spreadsheet supplement for product UV6418.

In 2006, Norway's Ministry of Finance announced it would exclude Wal-Mart Stores Inc. from its government pension fund, citing the company's "serious/systematic violations of human rights and labor rights." Norway's fund, one of the largest sovereign pension funds, owned more than 6 million Wal-Mart shares at the time, as well as 8 million shares of Wal-Mart de Mexico, all of which it divested. This case teaches students about the complex issues raised by socially responsible investing, such as the merits of taking an activist approach, the responsibility of corporations for actions of its suppliers, and the difficulties of obtaining cost-efficient information.

In late December 2010, most emerging markets were struggling to contain the appreciation of their currencies, so perhaps currency crises were not likely in the foreseeable future. But conditions could change quickly. This case reviews different varieties of currency crises and two in particular: United Kingdom in 1992 and Hong Kong in 1998. These were two very different types of crises, and understanding them could serve the protagonist well when future crises occurred.

This case examines issues surrounding the choice of financing arrangements for the acquisition of Radiologix in July 2006. The case follows Mark Stolper, the CFO of RadNet, as he considers how to raise the $363 million in funds necessary to finance the acquisition. When completed, the combined firms will be the largest private diagnostic-imaging provider in the United States. When Stolper joined RadNet in 2003, he confronted a company with ""too much debt, and the wrong kind of debt."" His goal is to finance the acquisition in a way that further enhances the financial strength and operating flexibility of the company. Given the large size of funding required, the firm is unlikely to be able to fund the entire transaction with first-lien or bank debt. His financial advisors differ in their recommendations for how to raise the remaining funds-one suggests using second-lien debt, and the other, high-yield debt. The purpose of the case is to familiarize students with frequently encountered types of debt financing that are used to finance mergers and acquisitions and other corporate transactions. The case provides information on the distinctions among first-lien, second-lien, and high-yield debt in relation to their price, availability, flexibility of covenants, repayment ease, and composition of likely investors. The case is designed for use in courses that cover corporate financing, M&As, and debt financing.

Joseph Vigneault and his entrepreneurial partners wanted to raise $500,000 to pursue a new venture through the purchase of a currently existing company in the $4,000,000-5,000,000 price range. A boutique investment bank introduced them to the features of the Capital Pool Company (CPC) program. Vigneault needed to decide if a CPC was an option that he and his partners should consider. He needed to consider the effect on their ownership stake in the company and calculate the return on their investment.

An equity analyst uses a variety of methods to value Wal-Mart shares with a view to making a buy/sell or hold recommendation for the stock. Her key task is to use an intrinsic value approach to price the shares and to then compare the resulting price with the price at which the stock is traded in the market.

The owner of Finchco plans to sell his company, which is a distributor of industrial materials. The purpose of the case is to utilize several valuation methods and suggest the possible deal structure. The situation is made somewhat more complicated because Finchco has a real estate subsidiary that must be valued, and because the company has a great opportunity to land a major new customer whose value must be included in the analysis.

It was February 16, 2005 and Edgar James, from Merrill Lynch, one of the leading investment banks, was reviewing the file regarding the leveraged buyout (LBO) of Masonite International Corporation (Masonite). A couple of months earlier, Kohlberg, Kravis and Roberts (KKR), one of the oldest and largest private equity firms, had teamed up with Masonite's senior managers and offered to take the company private via a US$2.52 billion LBO. A shareholder meeting to vote on the transaction was scheduled in less than 48 hours, but it was very likely that the deal would be voted down. Most of the major shareholders had already announced that they would reject the transaction, arguing that the premium offered by KKR was insufficient. As the head of Merrill Lynch's team working on the LBO, Edgar had to finalize his recommendation before talking to Masonite's Board of Directors. Was KKR about to walk out? After all, there were increasing concerns about the profitability and growth prospects of building products companies in general and Masonite in particular, due to the ever-increasing cost of raw materials, the negative impact of the tightening of monetary policy on consumer spending and mortgage rates, and the debatable health of the housing market. But Masonite was still one of the best-positioned companies in the industry, with strong earnings and cash flows. Would this be enough to entice KKR to increase their offer?

It was May 19, 2004, and Ralf Thomas, analyst at SBU Investment Research, was reviewing the Form 40-F that one of the companies he was covering, Masonite International Corporation (Masonite), had filed with the Securities and Exchange Commission (SEC). Masonite was one of the world's largest manufacturers and merchandisers of doors, door components, and door entry systems, headquartered in Mississauga, Ontario. Its latest results were very good, with strong growth as well as high margins and cash flows. The company was on track to pay down debt and be well positioned to achieve the investment-grade credit rating it was coveting. But despite all this good news, Ralf had some concerns; he was wondering whether this strong performance was sustainable. He knew that earnings of building products companies were cyclical. They were generally sensitive to the state of the economy, demand for housing, consumer sentiment, sharp increases in interest rates, changes in buyers' credit terms, and rising prices of raw materials such as wood products and steel. Most economies around the world were recording full-employment and noninflationary growth rates, but real growth was so high that central banks were mooting the idea of raising interest rates. In addition, there were now concerns that there might be housing bubbles in several geographic areas. But even more worrying, the price of raw materials, like steel, had more than doubled over the last 12 months, and there were shortages, in particular in North America, Masonite's main market. If sales were to soften in an environment marked by high production costs and rising interest rates, Masonite's margins and cash flows could be under pressure. Ralf still had a "buy" rating on the stock. Was it time to change it to a "hold" or even a "sell"?

The vice president of operations for Acpana Business Systems Inc., a Canadian software development and backup-as-a-service provider located in Toronto, Canada, is concerned that the recent appreciation of the Canadian dollar is significantly affecting Acpana’s revenue and undermining the company’s organic growth. The case focuses on understanding and quantifying the risks associated with exchange rate fluctuation and its impact on a firm’s revenues and costs. The case introduces instruments available to hedge risk, including forward contracts and put and call options.

The Nokia case provides an opportunity to explore financial policy in a situation of broad strategic change. In recent years, Nokia, the world's leading producer of mobile phones, had seen its market share and profits eroded by rival products such as Apple's iPhone and phones featuring Google's Android operating system. In February 2011, Stephen Elop, the recently appointed president and CEO of Nokia, announced a broad strategic plan and partnership with Microsoft to correct the company's course and improve its competitive position. Analysts regard the next two years as a period of great uncertainty for the company. The CFO of Nokia must reassess the firm's financial policy in light of the plan and consider its effects on the potential need for external funds, and the appropriate mix and cost of the debt or equity financing that might be used to raise those funds. Nokia, like many technology companies, often carried high cash balances to preserve financial flexibility, but in 2008 and 2009 in response to the global financial crisis it had drawn down cash to historically low levels and experienced several downgrades of its debt by major credit rating agencies. Students must evaluate the tradeoffs between maintaining cash reserves and the need for external funds and work through the implications of financing the projected need for external funds with debt or equity.

Spreadsheet supplement for case UV5656.

At the start of 2010, major global iron ore producer Vale must choose which of three currencies in which to issue new bonds. While generally a good time for firms to issue debt, market conditions varied across countries and currencies. Students must calculate a hedged cost of funds for each currency and must explore the conditions that give rise to differences in those costs.

Jason Sterling sat on his hedge fund's Stamford, Connecticut, trading floor on January 28, 2011, scouring the Wall Street Journal and Bloomberg websites for any news coming out of the World Economic Forum's annual meeting in Davos, Switzerland. He knew that the emerging sovereign debt crisis in Europe would be a primary topic of discussion among the world leaders and bankers who had convened at the summit, and he was hoping to find some new information that he could trade on before the close of trading for the week. Sterling's fund traded primarily in sovereign debt, and he needed to figure out if European leaders would be able to come up with a viable solution to the crisis or whether the debt crisis would lead to the default of several European nations. At the forefront of the crisis was Greece, which faced ballooning deficits, rising interest payments, and the prospect of having to default on or restructure its outstanding debt. Ireland, Italy, Portugal, and Spain were the other euro zone countries that faced growing fiscal problems and were the focus of sovereign debt investors. Sterling knew that if a solution was not found in the coming weeks, the sovereign debt markets could be thrown into turmoil.

Nashton Partners was a search fund founded by two HBS MBA's that raised $500,000 to finance a search for a company that they could purchase and then run for the next five to ten years. The case examines the search fund structure, the two-year search, and two potential acquisitions.

During the summer of 1998, Bob Aston and his partners, all bankers, spent many days discussing their plans to start a bank in southeastern Virginia, United States. Deregulation was transforming the banking industry. In Virginia, mergers and acquisitions in the industry had led to the emergence of large banks that had headquarters in other states. Aston felt that banking as he knew it was disappearing. However, before they could start a bank, Aston and his partners faced many questions and decisions: How would they raise the capital? Who would the bank serve? How would they compete with the larger banks that had emerged due to the deregulation? <br><br><br><br>The decisions they made at the founding had a lasting effect on TowneBank. This became evident a decade later as financial institutions around the country experienced a severe crisis that was triggered by exposure to risky mortgages, while TowneBank remained relatively unscathed. However, the management team had to consider several issues as the crisis unfolded. Should they accept the Troubled Asset Relief Program (TARP) funds that the U.S. Treasury had offered to banks (even those that were unlikely to fail and were adequately capitalized)? How could they ensure TowneBank’s growth? Should they acquire distressed banks in the local market?

In this case a consultant to pension funds ponders the unique opportunities and risks she faces as she considers adding real estate to the fund's portfolio for the first time. While the fund already owns REITs, its trustees believe that direct real estate investment could offer protection against the threat of inflation. But the category of real estate includes a wide range of distinct subclasses, including office, retail, industrial, hotel, and rental apartments. In analyzing the situation, students must determine which of these sectors provides the best hedge against inflation, and the risks and returns of the asset class as a whole.

Spreadsheet supplement to case CU156.

This is a supplement to Tata Steel Limited: Convertible Alternative Reference Securities (A). Tata Steel’s launch of a convertible bond offering in exchange for its convertible alternative reference securities issued in 2007 was in response to shifts in environmental factors. An analysis of the offer allows for a valuation exercise and an assessment of a capital restructuring decision that considers the interests of the issuer and of the investors.