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Case Studies in Structured Finance

Case Studies in Structured Finance. Sealed Air. Ian Giddy August 2000. Questions :. 1. Why did Sealed Air undertake a leverage recapitalization ? Do you think that it was a good idea ? For whom ? 2. How much value was created ? Where did it come from ?. Organizational effects of leverage.

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Case Studies in Structured Finance

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  1. Case Studies in Structured Finance Sealed Air Ian GiddyAugust 2000

  2. Questions : • 1. Why did Sealed Air undertake a leverage recapitalization ? Do you think that it was a good idea ? For whom ? • 2. How much value was created ? Where did it come from ?

  3. Organizational effects of leverage Too little leverage -waste of resources inside organization • Inefficiency • Too much scrap, capital expend., • R&D Too much leverage -pushed to generate cash at the expense of value -too little inventory -not enough credit for customers - skimping on quality, capital expend, R&D

  4. Sealed Air's changing competitive environment They had traditionally neglected manufacturing in favour of marketing. - able to do this because of a lack of competition About a year before the recap, they launched a program of manufacturing excellence.

  5. What to do with the cash ? • Understanding the Special Dividend Transaction • The Effect of the Recap on Firm Value and Performance • Change in Shareholder Value over the year following the Recap

  6. High Leverage and Manufacturing Excellence • Organizational Effects of Leverage - already in • Changes in Organizational Priorities and Compensation • Turnovers in the Company's Investor Base • Implications of the case

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