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In Tokyo on Monday, April 24th, 2006, the U.S. dollar fell to a three-month low against the yen, carrying over its weakness from Friday's trading in New York, where it had fallen more than two yen (1.75%). Mr. Teruhide Osawa, president of OSG Corporation in Japan (OSG), a multinational cutting-tool producer, was following the foreign exchange market on his computer screen that Monday and was very surprised to see that the yen had appreciated 1.75% in one day. He wondered if such a big change would cause problems for the company's business. Faced with big fluctuations in the yen-dollar exchange rate, he summoned the manager of the Support Center Finance Group, asking him to analyze and report on how OSG's foreign currency transaction exposure was measured, and how it could be managed. He asked the manager specifically how the company was currently hedging its foreign currency exposures. The Finance Group gave a presentation at a meeting of the board of directors on May 29th, 2006. They explained that in order to eliminate short-term transaction exposure, a variety of hedging methods were available at varying costs to the company. After the presentation by the Finance Group, members of the board got into a heated discussion.

Founded in 1987, China Merchants Bank (CMB) is a pioneer in the use of technical innovation and IT as a competitive tool in the rapidly evolving Chinese banking sector. With a relatively small branch network when compared to its larger competitors, CMB uses an IT-driven strategy to introduce an "all-in-one" card, which integrates a suite of financial products to drive its personal banking business enabling CMB to be ranked 6th among China's commercial banks and 2nd among the other national commercial banks in terms of total assets as of June 2006. Underlying its excellence in personal banking is CMB's leadership in developing its credit card business. By April 2006, CMB had issued a total of over 5 million credit cards, capturing one-third of the Chinese credit card market. In September 2006, CMB's IPO in Hong Kong fetched about $2.4 billion and, given deregulation in the banking sector in China, CMB's President was presented with new challenges and opportunities concerning how such funds should be productively allocated to ensure CMB's competitiveness.

How should creditors pursue their claims in a multi-jurisdiction bankruptcy? David Butters, Managing Director at Lehman Brothers, negotiates a restructuring of Navigator Gas Transport, a shipping company that is headquartered in Switzerland, incorporated in the Isle of Man, and operates ships that travel around the world. In analyzing the choices he faces, students must consider how the initial capitalization of Navigator contributed to its financial distress, evaluate several restructuring plans from a variety of perspectives, and assess how Butters might resolve the legal inconsistencies that arise in a multi-jurisdiction bankruptcy. In addition, they must determine if Butters has sufficient information about, and control over, operations at Navigator to be confident engaging in a lengthy set of legal proceedings.

As with many modern-day large pools of capital, the Vanderbilt University endowment is significantly invested in alternative assets such as hedge funds, private equity, real estate, and natural resources. The endowment's investment committee chair is attempting to understand the complexity of the portfolio and the risks that might be present. How should the risks of these sophisticated strategies be measured? And, in particular, what risks is the endowment exposed to by virtue of the many types of leverage inherent in alternative investment strategies. Finally, did the institution have sufficient resources to manage such a portfolio, and was the investment committee providing sufficient oversight.

Contains two parts: Part I contains a list of more than 500 acronyms for official institutions and other project finance terms; Part II contains a description of various interest and debt coverage ratios used in the field of project finance.

The vice-president of finance for Westwood Plastics, Inc. (Westwood), wants to assess the impact of the possibility of a weakening Canadian dollar on the company's financial health given its exposure to the Euro. Because Westwood is required by a loan covenant to generate a minimum level of pre-tax earnings, management is concerned about the possible impact of the exchange rate volatility on projected income and cash flows. The vice-president of finance is considering both an option and a forward strategy to minimize the foreign exchange risk Westwood is facing. She must decide how to use financial instruments to hedge the risk.

Spreadsheet Supplement for case 807005

The managing partners of two private equity firms are hoping to forestall a third bidding round for a target company, the European beverage division of Cadbury Schweppes. As they wait to meet with the CEO, they revisit their assumptions on the deal and review the insights that informed their valuation.

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In March 2006, Larry English, Director of Program Design and Innovation for Habitat for Humanity International Africa and the Middle East, was reflecting on a large development project in Durbin that had stalled. Notwithstanding global attention led by former President Jimmy Carter, the local capacity to carry out the project was limited. English wondered whether partnerships with private, for-profit real estate companies were plausible, and whether they could be carried out without undermining the mission of Habitat to focus on the very poor.

In July 2004, Shiv, Nand, and Uday Khemka are discussing their holdings in SUN Interbrew, a leading Russian beer producer that is part of the family's global portfolio of businesses. SUN Interbrew has been operating as a joint venture since 1998, when the Khemka family, who founded its predecessor company SUN Brewing in the early 1990s, decided to partner with Belgian beer giant Interbrew to survive the Russian financial and economic crises. Since then, the family has used Interbrew's capital and beer industry know-how to successfully grow the business. Now several developments prompt the Khemka family to consider a liquidity event. The family's five-year lock-up arrangement with Interbrew has just expired. In March 2004, Interbrew has announced its plans to take a controlling stake in Brazilian giant AmBev, a deal that will create the world's largest brewer. In addition, the Alfa Group, a Russian conglomerate that has become the third largest shareholder in SUN Interbrew, has announced its intention to take part in the company's management and attain a leading position in the Russian beer market. Is there a role for the Khemka family in the future of this company? Should they maintain some stake in the company and continue to participate in its management? Should they auction off their shares to the highest bidder and exit? Or should they play a role in the global beer industry through a stock-for-stock sale to InBev, and if so, at what price?

Activist investors Carl Icahn and Barry Rosenstein acquire a stake in Oklahoma-based company Kerr-McGee. They demand two board seats and ask the company to make several operational and financial changes, including the repurchase of equity and divestiture of their chemicals business. The case protagonist, Luke Corbett, CEO, opposes these changes.

A professor is shopping for a diamond engagement ring. He finds one with certain specifications for a certain price, and wishes to determine if the price of the diamond is fair. He collects data on the prices and characteristics (cut, color, clarity, and carats) of several hundred diamonds from three Internet wholesalers. Can be used for linear regression analysis with categorical variables as well as other statistical techniques.

The chief financial officer (CFO) of TELUS Corporation (Telus) has just been informed that Moody's, a bond rating service, has downgraded the firm's credit rating to one notch below investment grade. The CFO's challenge is to determine what specific actions, if any, to recommend to the firm's audit committee. First, this case facilitates a discussion on how changes in capital structure impact a firm's earnings, stock price and flexibility to carry out plan. Second, students learn about how bond ratings are set and how a firm's bond rating affects its bond yield. Last, by focusing on the situation faced by Telus during challenging market conditions in 2002, students learn how to manage relationships with investors while in the midst of change.

In late 2000, Vincent Lo, a prominent Hong Kong developer was invited by the Deputy Mayor of Chongqing, China to undertake a major redevelopment of the urban core. Lo had previously successfully developed the landmark Xintiandi retail and entertainment district in Shanghai. Lo must decide if the opportunity is the right fit in terms of place, timing, government support, and market demand.

This note outlines portfolio returns and variance calculations for a portfolio of two risky assets. Particular attention is given to developing understanding of the diversification benefit and emphasizing the often misunderstood point that there are diversification benefits even if the returns to the two stocks are positively correlated. The note is designed to be used as a reading to supplement a class where the students implement the equations with real data.

Spreadsheet Supplement for case 207076

Focuses on the buyout of HCA by three private equity firms: Bain Capital, KKR, and Merrill Lynch Global Private Equity. It provides an opportunity to discuss a variety of issues related to leveraged buyouts including the process, the role of private equity, the incentives of the participants, the benefits to conflicting shareholders, and the valuation of the buyout.