Why Did Marvel File for Chapter 11? Were the Problems Caused by Bad Luck, Bad Strategy, or Bad Execution?

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The third plan would see public debt holder exchange debt with a face value of $894.1 million so as to gain equity in the newly restructured firm. However, it planned to repay its secured creditors and its unsecured creditors in full.

The proposed plan of negotiating with creditors had several benefits to the company. First if would allow marvel to restructure the firm without additional outside assistance and it would provide an opportunity for marvel to focus on growing rather than selling business and protect potential merger scenarios. However, it was unlikely the creditors would agree since they were already incurring huge losses. And also the bond h0older would not agree since it would prevent bond sales.

Carl Icahn who is known as vulture investors knew that with this plans he would not gain control of the company since he had been buying public debt which was to be paid last and since marvel owed a lot he could only get very little. He felt the proposed plan would make the marvel less valuable evidence is $0.25 share value $2.75 from thus the firm becomes less valuable and as a bond holder the value in the firm is less.

If I were Carl I would not agree to the proposed plan since I had to lose a lot. Agreeing with the plan would men I as a bold holder would be the last to be paid and for 4.5% for our claims. Our bond equals to 79% of shares and if the plan goes ahead then we as bondholders will only claim 15% stake in the company. If I agree to the proposal it means I could not seemly bonds and that was my main intention when I was buying public debts. I would still propose they agree of my propose cash infusion of $350 million since I will get a rights issue.

3. How much is Marvel’s equity worth per share under the proposed restructuring plan assuming it acquires Toy Biz as planned? What is your assessment of the pro forma financial projections and liquidation assumptions?

The merging will to approximately 25% increase in the share worth rising the per share value of the firms. The cash retained will increase as both firms will combine their working capital leading to an increase in the liquidity ratio of the mergers. The final statement: the balance is as a result of combing together and operating in the same market without competing. Through the acquisition process, more assets are brought together and these results in proper exploitation of the resources owned. There is also an increase in the market share resulting to more sales leading high profit margins. In the long run the liquidity ratio of the firm will increase as it has been able to acquire more customers increasing the sales ratio. Through amortization and maximum utilization of all the goodwill and other intangible assets, allowing more growth in its production.

4. Will it be difficult for Marvel or other companies in the MacAndrews and Forbes holding company to issue debt in the future?

Perlman strategy to incorporate Marvel into MacAndrews &Forbes holdings for tax purpose have put his whole companies on the line as it has led it into debts and debts. In order to acquire the 20 million shares he needed he issued debt through three different companies holdings. This equity-backed has no problem as long as the share value is up but in this case the fall in share price makes it impossible for the company to pay interests. The marvel share are no longer profitable thus cannot afford to repay the interest thus the other companies through the rule of net operating losses are also unprofitable thus are not able to issue any debt.

5. Why did the price of Marvel’s zero-coupon bonds drop on Tuesday, November 12, 1996? Why did portfolio managers at Fidelity and Putnam sell their bonds on Friday, November 8, 1996?

The announcement by the Andrews group spokesman about the details of the proposed plan and since the stakeholders felt that the plan would decrease the share value. The fall of marvel stock price by 41% made the zero coupon bonds to fall by 50%. The Fidelity and Putnam sold their bonds on November 8 since they knew if the restructuring plan was made public the price of the bonds would fall. In fact doing thing saved them approximately $14 million in losses they sold the share at $0.37 per dollar at face value and it fell to 0.18%. We can speculate that following the announcement the demand for Marvel bonds fell and everyone wanted to sell to salvage the losses and thus the demand exceeded supply and thus the decrease in price. Represented below was the behavior of share price since the announcement of first restructuring plan to the second restructuring plan failed.