Case ID: 298059
Solution ID: 5424
Words: 2679
Price $ 75

Bankruptcy and Restructuring at Marvel Entertainment Group Case Solution

Case Solution

Several factors brought towards the bankruptcy of Marvel. The primary problem because of which the organization is facing bankruptcy may be the issuance of excessive debt. Furthermore, the organization collateralized this debt against its shares. Your debt taken by the organization was guaranteed by 77.3 million shares - almost 76% from the final amount of remarkable shares. The particulars of those collateralized shares are supplied in exhibit 6 from the case study. These financial obligations were released by separate holding companies of Marvel and transported high interest. Because the company�s profitability rejected, it grew to become progressively hard to finance your debt. The real cause from the downfall of marvel, therefore, is based on the reason why behind the loss of profitability and issuance of large quantities debt.

Excel Calculations

Asset Beta, Debt to Value, Tax Rate, Levered Beta, Risk-free Rate, Levered Beta, Market Risk Premium, Levered Return on Equity, 

Net Income, Net Working Capital, Capital Expenditures, Net Debt, Free Cash Flow to Equity, Total Assets, Debt to Value Ratio

Questions Covered

1. Why is Marvel in financial distress? Bad luck? Bad strategy? Bad implementation? When possible, back your claims with numbers.

2. Why did Marvel file for Chapter 11 rather than restructure out-of-court?

3. What do different stakeholders of Marvel get under liquidation? What if the firm just continues to operate without restructuring?

4. Evaluate the (new) restructuring plan. Assuming that the plan is approved, will it solve the problems tat caused Marvel to be in financial distress? If yes, how? If not, why not?

5. What is your assessment of the pro forma financial projections and liquidation assumptions? What are the different parties incentives to bias the valuation and in what direction?

6. Does the order in which the holding company and subsidiary go bankrupt have any influence n the expected returns for each stakeholder group?

7. Why did the price of Marvel’s zero coupon bonds drop on November 12th, 1996? Comment briefly.

8. What is Icahn’s strategy? Should Icahn vote for the restructuring plan? Why or hay not?