1 / 2

UST: Postscript

UST: Postscript. May 1999: UST begins implementing its recapitalization plan with a $240 million 10-year debt offering 1999 10K: repurchases shares for $466 million March 2000: UST further increases debt with a $300 million 5-year debt offering S&P rates UST debt A+, Moody’s A1

raquel
Download Presentation

UST: Postscript

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. UST: Postscript • May 1999: UST begins implementing its recapitalization plan with a $240 million 10-year debt offering • 1999 10K: repurchases shares for $466 million • March 2000: UST further increases debt with a $300 million 5-year debt offering • S&P rates UST debt A+, Moody’s A1 • April 2000: UST suspends recapitalization program after $1.05 billion antitrust violation award against it. Illustrates that financial policy and business strategy interact!

  2. UST: Even cash cows should borrow! • Debt increases shareholder value via corporate interest tax shield • Interest tax shields are limited by: • Firm’s ability to generate sufficient EBIT • Bondholders’ personal tax rates (if > corporate tax rate) • Bad reasons for more debt: higher ROE, EPS (should be discounted at higher equity cost also, so no effect on value (MM)!) • By levering up, UST created value on the right hand side of the balance sheet, but gain from improved capital structure is relatively small

More Related