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  • Debt Policy at Ust Inc

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    Irfan Mohd
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    UST is considering reversing its long-standing conservative financial policy by undertaking a $1 billion recapitalization. This would raise key issues, such as whether UST's past profitability and projections justify taking on debt, its ability to repay the debt, and the impact on its value. As a bondholder or credit analyst, UST's business risks would need to be evaluated and a credit rating assigned based on factors like its attributes and ability to make interest payments on the additional debt while maintaining dividend payments since 1912.

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    UST is considering reversing its long-standing conservative financial policy by undertaking a $1 billion recapitalization. This would raise key issues, such as whether UST's past profitability and projections justify taking on debt, its ability to repay the debt, and the impact on its value. As a bondholder or credit analyst, UST's business risks would need to be evaluated and a credit rating assigned based on factors like its attributes and ability to make interest payments on the additional debt while maintaining dividend payments since 1912.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
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    640 views7 pages

    Debt Policy at Ust Inc

    Uploaded by

    Irfan Mohd
    UST is considering reversing its long-standing conservative financial policy by undertaking a $1 billion recapitalization. This would raise key issues, such as whether UST's past profitability and projections justify taking on debt, its ability to repay the debt, and the impact on its value. As a bondholder or credit analyst, UST's business risks would need to be evaluated and a credit rating assigned based on factors like its attributes and ability to make interest payments on the additional debt while maintaining dividend payments since 1912.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as PPTX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 7

    ISSUES TO BE CONSIDERED

    UST is planning to reverse a long standing conservative financial policy?


    UST considering $1 billion recapitalization ?

    For UST to go for recapitalisation


    Past profitability & future projections Is past performance is expected to continue in

    future. Ability to the firm to pay off the debt? How will the value influenced by this decision of debt recapitalization?

    Evaluate the business risk of UST from a bondholders point of view or credit analyst. What rating do you assign to the company?

    What are the primary business risks associated with UST Inc? What are the attributes of UST inc? Evaluate from the point of view of the Bond holder? Why is UST Inc Considering a leveraged recapitalization after such a long history of conservative debt policy? Should UST undertake the $1 billion recapitalization ? Calculate the effect on USTs Value , assuming that the entire recapitalization is implemented immediately (Jan 1, 1999)

    Assume a 38% tax rate Prepare a Performa income statement to analyze whether UST will be

    UST has paid uninterrupted dividends since 1912. Will the recapitalization hamper the future dividend payments?

    able to make the interest payments? For basic analysis, assume the $1 billion in debt is constant and perpetual.

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