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LIBOR plus basis points. With just a few weeks until closing, the sellers asked to renegotiate the terms of the seller note that had been agreed to early in the acquisition process. Kravis, and George R. We summarize below the board’s active participation in the process. Interest rate variable at the greater of 50 basis points over the IRN rate see above or an increasing spread over time over the rate on the 7 year treasury note. The Fixed Rate will be equal to a rate determined by Holdings’ financial advisors, on the one hand, and Dillon and Lazard, on the other hand, designed to result in the Debentures trading at par on a fully distributed basis, without giving effect to the conversion feature of the Debentures.

Cash and cash equivalents Accounts and notes receivable Inventoriesc Prepaid expenses and excise taxes Net assets available for saled Total current assets Property, plant, and equipment, net Trademarks and Goodwill, net Other assets and deferred charges Liabilities and Stockholders’ Equity Current liabilities: Perold as the basis for class discussion rather that to illustrate either effective or ineffective handling of an administrative situation. Registered, but not listed on an exchange. An often mentioned source of money was KKR’s LBO fund, which still had several billion dollars available for investments described more fully below. The following factors led to the ultimate victory of KKR’s lower bid. KKR first attracted serious notice in when it took Houdaille Industries, the firm’s first major New York Stock Exchange-listed company, private in a leveraged buyout.

First, the firm could try to raise external funds and repurchase all or a portion of the PIK reset bonds. The majority of the existing debt was secured “equally and ratably” with the bank debt, while some existing debt was actually junior to the banks’ claims. KKR first attracted serious notice in when it took Houdaille Industries, the firm’s first major New York Stock Exchange-listed company, private in a leveraged buyout.

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Upon election to extend maturity, interest rate must be reset to obtain a bid value ofbut must be in the range of So it is using cheap source of finance to earn good returns. While KKR proposed to distribute 25 percent of the equity in the future company to existing shareholders, the management group offer included only 15 per cent.

RJR Nabisco Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

While KKR promised to keep the tobacco and most of the food business intact, the management group planned to keep only the tobacco jrr see Table Z. Analysts thought RJR would be within this 1: Cite View Details Purchase Related. Increasing Rate Notes due The rate must be in the range of Tobacco revenue was projected to grow at 8.

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If the conversion occurs, the bondholders forego the right to the interest accrued on the debentures. Tobacco-related Litigation During the s, investors were concerned that the tobacco companies would be hit with large product liability damage awards. The sellers asked for personal guarantees from the individual investors, something Medoff knew his investors would not agree to.

On a purely monetary basis, the two offers were very dose; the final decision was based on other factors.

rjr nabisco case study hbs

If in case it will deny then, they should contract to nbs that the RJR Nabisco will. Gives students the opportunity to explore issues facing the board of directors in a leveraged buyout. If they did not recover and the reset proved infeasible, KKR could then try to negotiate with the bondholders and banks, or seek Chapter 11 protection, or both.

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LIBOR plus basis points. Subordinated Floating Rate Notes due The cost is not so big; it is the. These are the good terms which they have incorporated into the auction so that the bidding.

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The raison d’etre of the Bank Credit Agreement was primarily to ensure that the banks were paid off ahead of anybody else; exceptions to this principle were few. Prior to the first round of bidding, the board announced that the bidding deadline would not be extended. Except for the stumbling block created by Moody’s downgrade, the plan had proceeded as forecast: On the surface, it seemed like a risky strategy, which could scare off all the bidding groups.

They have incorporated another condition to secure the rights of the share holders that the sale. While there had been court decisions against the tobacco companies, none of any significance stood on appeal. Fees charged on other large deals as a percentage casse the total transaction in parentheses were: Food sales were forecast to grow at 8.

RJR Nabisco

The desire was to leave some stub portion of the company’s stock in public hands. RubackRoyce Yudkoff and Ahron Rosenfeld. Plaintiffs’ arguments, by and large, fell into two general camps: Many participants in the fund had invested money with KKR since the beginning of the decade.

This is because the interest they will pay is less than the other two operating.