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    Sealed Air

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    Anju Babu
    Sealed Air undertook a leverage recapitalization to generate cash from increased debt that was distributed to shareholders as a special dividend. This created value for shareholders by increasing their ownership in the company's future cash flows. However, high leverage also pushed the company to focus excessively on cash generation at the expense of long-term value through underinvestment. The recapitalization was beneficial for shareholders in the short-term but risked harming the company's competitiveness in the long-term if leverage was too high.

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    Sealed Air

    Uploaded by

    Anju Babu
    559 views7 pages
    Sealed Air undertook a leverage recapitalization to generate cash from increased debt that was distributed to shareholders as a special dividend. This created value for shareholders by increasing their ownership in the company's future cash flows. However, high leverage also pushed the company to focus excessively on cash generation at the expense of long-term value through underinvestment. The recapitalization was beneficial for shareholders in the short-term but risked harming the company's competitiveness in the long-term if leverage was too high.

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    Sealed Air Corporation Case Solution

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    Sealed Air undertook a leverage recapitalization to generate cash from increased debt that was distributed to shareholders as a special dividend. This created value for shareholders by increasing their ownership in the company's future cash flows. However, high leverage also pushed the company to focus excessively on cash generation at the expense of long-term value through underinvestment. The recapitalization was beneficial for shareholders in the short-term but risked harming the company's competitiveness in the long-term if leverage was too high.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    559 views7 pages

    Sealed Air

    Uploaded by

    Anju Babu
    Sealed Air undertook a leverage recapitalization to generate cash from increased debt that was distributed to shareholders as a special dividend. This created value for shareholders by increasing their ownership in the company's future cash flows. However, high leverage also pushed the company to focus excessively on cash generation at the expense of long-term value through underinvestment. The recapitalization was beneficial for shareholders in the short-term but risked harming the company's competitiveness in the long-term if leverage was too high.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 7

    Case Studies in Structured

    Finance
    Sealed Air

    Ian Giddy
    August 2000

    Questions :

    1. Why did Sealed Air undertake a


    leverage recapitalization ? Do you
    think that it was a good idea ? For
    whom ?

    2. How much value was created ?


    Where did it come from ?

    Organizational effects of
    leverage

    Too little leverage


    -waste of resources inside
    organization
    Inefficiency
    Too much scrap, capital
    expend.,
    R&D

    Too much leverage


    -pushed to generate cash at
    the expense of value
    -too little inventory
    -not enough credit for
    customers
    - skimping on quality, capital
    expend, R&D

    Sealed Air's changing


    competitive environment
    They had traditionally neglected
    manufacturing in favour of marketing. able to do this because of a lack of
    competition
    About a year before the recap, they launched
    a program of manufacturing excellence.

    What to do with the cash ?

    Understanding the Special Dividend Transaction

    The Effect of the Recap on Firm Value and


    Performance

    Change in Shareholder Value over the year


    following the Recap

    High Leverage and Manufacturing Excellence

    Organizational Effects of Leverage - already in

    Changes in Organizational Priorities and Compensation

    Turnovers in the Company's Investor Base

    Implications of the case

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