Williams CaseEssay Preview: Williams CaseReport this essayEvaluate the terms of the proposed $900 million financing from the perspective of both parties. How would you calculate the return to investors in this transaction? If you need more information, what information do you need?
Williams Company is pressed by circumstances to decide whether to enter into a high-cost loan agreement that will help it solve its imminent liquidity crisis, caused by a series of unfortunate events for the business and a large amount of short-term and long-term debt maturing in the second half of the year. The cost of the loan is extremely high, but, given the disadvantaged situation of the company, might be the only option that will allow the company to stay in business and prevent bankruptcy for its foreseeable liquidity problems.
Williams debt rating had a number of downgrades by rating agency, which combined with the increasing required yields of corporate bonds, is already adding up to a very high cost of debt for the company even on the open debt markets. Moreover, an ongoing crisis on the financial markets is making it almost impossible to find investors willing to lend funds to the already distressed company. The telecommunication subsidiary of Williams recently went bankrupt and one of the major businesses, the energy trading, is in decline.
To sum up, the steeply priced short term loan may be the only option for the company to survive through a very tough moment. The short-term loan will give the company time to improve its structure and ratings. Enhancing the company asset structure and liquidity can make it possible to raise debt at a lower cost by the time the loan matures in one year. Also, more of the company assets can be sold out to both raise capital and reduce maintenance and support costs for its facilities and save from working capital enhancement and operating expenses cuts. However, the high cost of the loan can hamper the ability of the company to make the necessary operational improvements and capital investments that are necessary to improve profitability and increase liquidity. To evaluate that, we need more information on the company investment needs and profitability by business segment. We are also not given sufficient information to evaluate the company capital requirements to sustain and improve competitiveness.
The Long-Term Loan
We are now in position to invest in our remaining business segments. Additionally, we will be able to focus the company’s efforts on increasing its operating returns. For example, we are exploring a partnership with a company called Yandex to use the equity stake in GNC to invest in our new financial operations, which are already being audited at the financial service office at Citigroup. These capital and operating returns would be greater than our long-term loan since a partnership could lead to an increased return on equity over the short term on which they are invested, while providing investors with a more reasonable return on equity over time.
These capital gains would allow for an increased capital return over the expected period with a more competitive capital and liquidity in our business rather than over the long-term. Additional capital gains could be saved on our other financial services while retaining and increasing our profitability. In addition, the more we invest in our existing businesses there, the more successful we are in attracting additional and growing customers. These gains would allow us to pay a higher proportion of our costs on these businesses when we have less capacity to invest there at the local and state-specific levels, which we have already done and did pay on our long-term loan.
If we continue to maintain a solid operating record through our business as an independent company, then we are most likely to be able to generate our preferred return on our long-term loan over several years, if sufficient capital gains are made. Although Yandex is primarily owned by private equity, the company also has a substantial public company equity base and we expect the interest rate on its debt to steadily increase over time.
Our business growth is expected to improve over the next several years and as both our company wealth and our growing business model have shown, we are confident that our debt could grow over time. Since Yandex has successfully diversified to a new portfolio of capital, we expect to generate more capital gains and more of our costs on equity than we would in our short-term loan. Therefore, our continued ability to generate preferred returns will largely mitigate the financial problems that we face as a result of our continued inability to invest in our remaining business segments. More significantly, our current short-term loan could be more easily utilized in future periods. As our net income increased in 2015 versus 2016, our overall income during that time grew by more than $20 million, compared with $12.5 million during 2015. The overall financial performance for the company in 2015 compared with 2016 is substantially better than our current financial performance in previous years. During the period, gross margin for certain companies decreased from 40.6 percent to 51.5 percent as of Jan. 31, 2015 compared to 40.9 percent in 2016.
Our company asset profile has also shown to be in good shape in the past. However, our company asset profile has shown to be in poor shape in the past. Our company assets have shown to be in bad shape in recent months such as after significant financial performance, increased debt issuance underwriting requirements and an increase in debt issuance expenses. Some companies experienced periods of limited, short-term market activity. The company’s current short-term loan portfolio, which remains under liquidation on or about June 30, 2016, which contained $27.0 billion of assets, represented $21.75 percent of our total company assets value. The company now holds $15.5 billion of our total company asset values, a relatively small amount compared with our current full-year 2016 assets value. Our current company debt is currently $39 percent of our company assets value. Since our short-term loan was repaid fully within 90 days of its due date, we expect that future refinancing of our long-term loan would be more than adequate to restore the company’s long-term debt, which represents another barrier to borrowing at that time.
If we manage successfully to manage our long-term loan properly and successfully manage our investments in our existing and potential future business, the ability
The Long-Term Loan
We are now in position to invest in our remaining business segments. Additionally, we will be able to focus the company’s efforts on increasing its operating returns. For example, we are exploring a partnership with a company called Yandex to use the equity stake in GNC to invest in our new financial operations, which are already being audited at the financial service office at Citigroup. These capital and operating returns would be greater than our long-term loan since a partnership could lead to an increased return on equity over the short term on which they are invested, while providing investors with a more reasonable return on equity over time.
These capital gains would allow for an increased capital return over the expected period with a more competitive capital and liquidity in our business rather than over the long-term. Additional capital gains could be saved on our other financial services while retaining and increasing our profitability. In addition, the more we invest in our existing businesses there, the more successful we are in attracting additional and growing customers. These gains would allow us to pay a higher proportion of our costs on these businesses when we have less capacity to invest there at the local and state-specific levels, which we have already done and did pay on our long-term loan.
If we continue to maintain a solid operating record through our business as an independent company, then we are most likely to be able to generate our preferred return on our long-term loan over several years, if sufficient capital gains are made. Although Yandex is primarily owned by private equity, the company also has a substantial public company equity base and we expect the interest rate on its debt to steadily increase over time.
Our business growth is expected to improve over the next several years and as both our company wealth and our growing business model have shown, we are confident that our debt could grow over time. Since Yandex has successfully diversified to a new portfolio of capital, we expect to generate more capital gains and more of our costs on equity than we would in our short-term loan. Therefore, our continued ability to generate preferred returns will largely mitigate the financial problems that we face as a result of our continued inability to invest in our remaining business segments. More significantly, our current short-term loan could be more easily utilized in future periods. As our net income increased in 2015 versus 2016, our overall income during that time grew by more than $20 million, compared with $12.5 million during 2015. The overall financial performance for the company in 2015 compared with 2016 is substantially better than our current financial performance in previous years. During the period, gross margin for certain companies decreased from 40.6 percent to 51.5 percent as of Jan. 31, 2015 compared to 40.9 percent in 2016.
Our company asset profile has also shown to be in good shape in the past. However, our company asset profile has shown to be in poor shape in the past. Our company assets have shown to be in bad shape in recent months such as after significant financial performance, increased debt issuance underwriting requirements and an increase in debt issuance expenses. Some companies experienced periods of limited, short-term market activity. The company’s current short-term loan portfolio, which remains under liquidation on or about June 30, 2016, which contained $27.0 billion of assets, represented $21.75 percent of our total company assets value. The company now holds $15.5 billion of our total company asset values, a relatively small amount compared with our current full-year 2016 assets value. Our current company debt is currently $39 percent of our company assets value. Since our short-term loan was repaid fully within 90 days of its due date, we expect that future refinancing of our long-term loan would be more than adequate to restore the company’s long-term debt, which represents another barrier to borrowing at that time.
If we manage successfully to manage our long-term loan properly and successfully manage our investments in our existing and potential future business, the ability
The Long-Term Loan
We are now in position to invest in our remaining business segments. Additionally, we will be able to focus the company’s efforts on increasing its operating returns. For example, we are exploring a partnership with a company called Yandex to use the equity stake in GNC to invest in our new financial operations, which are already being audited at the financial service office at Citigroup. These capital and operating returns would be greater than our long-term loan since a partnership could lead to an increased return on equity over the short term on which they are invested, while providing investors with a more reasonable return on equity over time.
These capital gains would allow for an increased capital return over the expected period with a more competitive capital and liquidity in our business rather than over the long-term. Additional capital gains could be saved on our other financial services while retaining and increasing our profitability. In addition, the more we invest in our existing businesses there, the more successful we are in attracting additional and growing customers. These gains would allow us to pay a higher proportion of our costs on these businesses when we have less capacity to invest there at the local and state-specific levels, which we have already done and did pay on our long-term loan.
If we continue to maintain a solid operating record through our business as an independent company, then we are most likely to be able to generate our preferred return on our long-term loan over several years, if sufficient capital gains are made. Although Yandex is primarily owned by private equity, the company also has a substantial public company equity base and we expect the interest rate on its debt to steadily increase over time.
Our business growth is expected to improve over the next several years and as both our company wealth and our growing business model have shown, we are confident that our debt could grow over time. Since Yandex has successfully diversified to a new portfolio of capital, we expect to generate more capital gains and more of our costs on equity than we would in our short-term loan. Therefore, our continued ability to generate preferred returns will largely mitigate the financial problems that we face as a result of our continued inability to invest in our remaining business segments. More significantly, our current short-term loan could be more easily utilized in future periods. As our net income increased in 2015 versus 2016, our overall income during that time grew by more than $20 million, compared with $12.5 million during 2015. The overall financial performance for the company in 2015 compared with 2016 is substantially better than our current financial performance in previous years. During the period, gross margin for certain companies decreased from 40.6 percent to 51.5 percent as of Jan. 31, 2015 compared to 40.9 percent in 2016.
Our company asset profile has also shown to be in good shape in the past. However, our company asset profile has shown to be in poor shape in the past. Our company assets have shown to be in bad shape in recent months such as after significant financial performance, increased debt issuance underwriting requirements and an increase in debt issuance expenses. Some companies experienced periods of limited, short-term market activity. The company’s current short-term loan portfolio, which remains under liquidation on or about June 30, 2016, which contained $27.0 billion of assets, represented $21.75 percent of our total company assets value. The company now holds $15.5 billion of our total company asset values, a relatively small amount compared with our current full-year 2016 assets value. Our current company debt is currently $39 percent of our company assets value. Since our short-term loan was repaid fully within 90 days of its due date, we expect that future refinancing of our long-term loan would be more than adequate to restore the company’s long-term debt, which represents another barrier to borrowing at that time.
If we manage successfully to manage our long-term loan properly and successfully manage our investments in our existing and potential future business, the ability
Berkshire Hathaway and Lehman Brothers appear to be able to gain significant