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    Case 8 Padgett Paperproducts Company

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    lehvrhon
    Padgett Paper Products is a small manufacturer that has been financing its growth through acquisitions using 90-day commercial bank notes. The banker wants to restructure Padgett's credit into a long-term loan. Students are asked to evaluate Padgett's strategy and performance, analyze the financial forecasts, and recommend loan terms and a plan of action for the banker. The case aims to exercise financial analysis skills and introduce debt structuring principles while also discussing the banker-client relationship and effects of inflation.

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    Case 8 Padgett Paperproducts Company

    Uploaded by

    lehvrhon
    221 views2 pages
    Padgett Paper Products is a small manufacturer that has been financing its growth through acquisitions using 90-day commercial bank notes. The banker wants to restructure Padgett's credit into a long-term loan. Students are asked to evaluate Padgett's strategy and performance, analyze the financial forecasts, and recommend loan terms and a plan of action for the banker. The case aims to exercise financial analysis skills and introduce debt structuring principles while also discussing the banker-client relationship and effects of inflation.

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    Case8PadgettPaperproductsCompany

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    Padgett Paper Products is a small manufacturer that has been financing its growth through acquisitions using 90-day commercial bank notes. The banker wants to restructure Padgett's credit into a long-term loan. Students are asked to evaluate Padgett's strategy and performance, analyze the financial forecasts, and recommend loan terms and a plan of action for the banker. The case aims to exercise financial analysis skills and introduce debt structuring principles while also discussing the banker-client relationship and effects of inflation.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    221 views2 pages

    Case 8 Padgett Paperproducts Company

    Uploaded by

    lehvrhon
    Padgett Paper Products is a small manufacturer that has been financing its growth through acquisitions using 90-day commercial bank notes. The banker wants to restructure Padgett's credit into a long-term loan. Students are asked to evaluate Padgett's strategy and performance, analyze the financial forecasts, and recommend loan terms and a plan of action for the banker. The case aims to exercise financial analysis skills and introduce debt structuring principles while also discussing the banker-client relationship and effects of inflation.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    Case 8 Padgett Paper products Company Synopsis and Objectives A small manufacturer of notebooks and other stationery products

    has been financing its growth-by-acquisition strategy by means of 90-day notes to a commercial bank. The banker seeks to restructure the credit, placing it on a long-term basis. The tasks are to (1) evaluate the strategy and financial performance of the company to date, (2) study the detailed financial forecasts and sensitivity analyses (given in the case), and (3) recommend a structure for the loan and plan of action for the banker. The case aims to exercise financial forecasting and analysis skills and to introduce some basic principles of debt structuring. In addition, the case raises several issues concerning the relationship between the banker and debtor. Finally, inflation is implicit in the forecast assumptions; the case thus affords an opportunity to discuss the financial effects of inflation.

    Suggested Questions Because much of the computation in this case is complete, an appropriate approach is to nudge students toward problem definition and resolution with the aid of less-directive-than-usual study questions: 1. As a banker, how would you evaluate Padgetts strategy and financial performance to date? 2. Why should Francis Libris, the banker, seek to structure Padgetts loan on a more orderly basis? 3. Why does Padgett need a loan? How fast can Padgett repay the loan? 4. What should Libris propose as terms for the new loan structure?

    DuPont Ratio Analysis

    Year 1993 1994 1995 1996

    Return on Equity .133 .114 .13 .146

    Profit/ Sales .076 .066 .058 .063

    Sales/ Assets 1.40 1.407 1.484 1.33

    Assets/ Equity 1.22 1.206 1.46 1.67

    By using the average ROE for the years 1998 -2000 (Exhibit 6) of 14.5% and the dividend payout ratio of 33%, we obtain the following self-sustainable growth rates: 5% Growth Average ROE Dividend Payout Self-Sustainable Growth Difference: Gss Projected Growth 16.13% 33.3% 10.76% +5.76% 10% Growth 17.5% 33.3% 11.67% +1.67% 15% Growth 18.87% 33.2% 12.60% 6.27%

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