Executive Summary This report provides a qualitative analysis of the Loewen case study, starting from the excessive

debt policy used in its expansion and ending with huge debt ratios and bankruptcy. The analysis includes the effect of the companys policy and the financial distress it caused and results of such a financial condition. Method of Analysis: For the analysis we have used the historical financial data of the company, the history of the company and its financing policy, and the financial data of its competitors. Findings: The important finding that were gathered are listed below Debt financing is considered the fastest and cheapest method in financing the growth of a company Excessive debt financing for explosive growth is not well recommended Financial distress factors are direct and indirect, and they vary in importance and effect on the overall future of the company Filing Chapter 11 bankruptcy protects the company from its debtors by allowing it to reorganize their debt structure, which might seem the best option in this case. Options/Recommendations: We found out 2 options that Loewen could undertake. Option 1: Selling assets to increase cash position and decrease debts (Calculation $) Option 2: File chapter 11 bankruptcy to give the company another chance in Legal time to reorganize its debt structure. (Corporate Debt Restructuring) Recommendation: filing bankruptcy seems to be the best option that Loewen has at this time, as it will allow it to startup its operations again and try to fix debt problems it faced by restructuring.

Summary: The Loewen Group inc., headquartered in Burnaby, British Columbia, is the second largest funeral service company in North America. Loewen operated and owned over 1100 funeral houses cross every corner of the world and more than 400 cemeteries in U.S. and Canada. By acquisitions in last twenty years, Loewen has been grown explosively. Just before the time the company went to bankruptcy, the companys consolidated revenue had grown 30 percent per year, on average, from 303 million to over $1.1 billion. However, Loewens financial situation is not as bright as its expansion path. It lost $599 million for 1998, compared to its earning $43 million in the previous year. The companys aggressive acquisition was mostly financed by debt.

1. How was the Loewen Group able to grow explosively for the first half of the 1990s? What were the advantages of debt financing enjoyed by the firm in this phase. ANS. The company could grow explosively in early half of 1990s by aggressive acquisition of small and independent funeral houses, cemeteries and related companies. The advantages of debt financing that Loewe enjoyed at this period were that the company itself can control its business; the interest that the company repay on its loan is tax deductible and lenders do not share profit that the company made. 2. How did loewen get to the position it found itself in 1999? ANS. The majority of Loewens acquisitions were funded through the use of debt. Their debt ratio has increased consistently over the past 10 years and hit a record high of 81% in 1998. Before 1998 Loewen had been successful at paying their interest on time but in 1998 their times interest earned ratio went below 1 to 0.43, indicating that they will not be able to cover their interest charges. Loewen no longer had sufficient funds to meet the several large interest and principle payments that were due in the following months.

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Names ABP Aaj tak ET Now NDTV Good Time Time Now UTV Movie Total

Amounts 8,89,891 14,71,017 5,05,283 2,52,810 14,19,107 3,62,024 49,00,132

Details Adv for Flora Adv for Flora Adv for Flora Adv for Flora Adv for Flora Adv for Flora

Transaction no 131011153938 131011153737 131011153939 131011153738 131011153940 131011153739