FedEx Case Study

.docx

School

Columbia Southern University *

*We aren’t endorsed by this school

Course

6301

Subject

Finance

Date

Jan 9, 2024

Type

docx

Pages

Uploaded by PresidentCrabPerson72

FEDEX 1 FedEx Case Study Columbia Southern University FIN 6301 Corporate Finance Dr. Keith A. Wade

FEDEX 2 Introduction FedEx Corporation is a global delivery services company headquartered in Memphis, Tennessee. It offers shipping, printing, and business services through its various operating companies, including FedEx Express, FedEx Ground, and FedEx Freight. The company was founded in 1971 and has grown to become one of the largest delivery companies in the world, serving customers in over 220 countries and territories. Regarding its approximate net worth, FedEx Corporation had a market capitalization of over $70 billion and reported annual revenue of over $70 billion. The company is known for its commitment to innovation, reliability, and fast delivery, and it continues to invest in technology and expansion to meet the evolving needs of its customers. Bonds FedEx Corporation, like many corporations, issues bonds to raise capital. In 2016, FedEx executed a four-part bond sale to help fund its planned acquisition of TNT Express, a European courier delivery services company. The four-part bond sale included the following components: 1. Fixed-rate bonds: FedEx issued fixed-rate bonds, which pay a fixed interest rate over the life of the bonds, to provide stability and predictability for investors. 2. Floating-rate bonds: FedEx also issued floating-rate bonds, which pay a variable interest rate tied to a benchmark, such as LIBOR, to provide protection against rising interest rates. 3. Euro-denominated bonds: FedEx issued euro-denominated bonds to tap into the European debt market and attract investors who prefer bonds denominated in euros.

FEDEX 3 4. US-dollar-denominated bonds: FedEx also issued US-dollar-denominated bonds to cater to U.S. investors and maintain its presence in the U.S. debt market. The four-part bond sale allowed FedEx to raise capital from a broad range of investors in the U.S. and Europe and diversify its funding sources. The proceeds from the bond sale were used to partially finance the acquisition of TNT Express and support the company's operations (Gokoluk, 2016). FedEx issued 500 million euros of April 2019 floating-rate notes, 750 million euros of bonds maturing in January 2023, and 1.25 billion euros of debt due in January 2027 as part of its four- part bond sale in 2016 to help fund its planned acquisition of TNT Express. These bonds offered different maturity dates and coupon payment structures, allowing FedEx to tap into a broad range of investors and meet its funding needs. The specific terms of these bonds, such as the interest rate and covenants, would have been agreed upon at the time of issuance (Gokoluk, 2016). Determine Value The announcement by the lead banks (BNP Paribas, Citi, Deutsche Bank, ING, and Wells Fargo) regarding the expected size of the new bond deal and initial price thoughts is related to the issuance of new bonds to replace the previously issued bonds that were redeeming, or maturing. In this case, the expected size of the new bond deal was €500 million, and the initial price thoughts were 95 basis points to 100 basis points over mid-swaps (Owen, 2019). Basis points (bp) are a unit of measurement used to express the change in interest rates or the spread between two securities. A basis point is equal to 1/100th of 1%, or 0.01%. The mid-swap rate is a benchmark for determining the interest rate on bonds and is based on the average swap rates for a given time period (Owen, 2019).

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version