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Fairness Opinions
A privately owned U.S. company with public debt had an opportunity to restructure its operations and turn around one of its primary subsidiary's operations. A U.S. hedge fund was prepared to provide the capital for the restructuring program, but on expensive cost of capital terms and conditions. The Board of Directors of the private company needed an arm's length fairness opinion to ensure the transaction was deemed fair from a financial point of view for all stakeholders in the company.
Certain dissident bondholders of the company's public debt were applying pressure on the controlling shareholder to forgo any further restructuring efforts and instead file for Chapter 11 in the bankruptcy courts.
We analyzed the structure of the proposed new capital financing, reviewed the business plan of the restructured subsidiary to assess its feasibility and weighed the alternatives for the company without the restructuring program. Due consideration was given to the public bond investors as well as the private shareholders.
We provided a fairness opinion on the funding for the restructuring program. The hedge fund provided the new capital and the company implemented its restructuring program. One year later, the company's cash flows improved significantly to the point where all public debt had been retired at par and the hedge fund investor had been paid off.
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