Bankruptcy and Restructuring at Marvel Entertainment Group

690 Words Oct 8th, 2014 3 Pages
Bankruptcy and Restructuring at Marvel Entertainment Group

1. Why did Marvel file for Chapter 11? Were the problems caused by bad luck, bad strategy, or bad execution? What is the amount of debt of MEG (the operating company) and the Marvel Holding Companies (Marvel owners)?

The Chapter 11 bankruptcy provided an opportunity for all the major stakeholders to evaluate their options regarding their investment and control of Marvel. Bankruptcy alleviated Marvel’s immediate cash shortage, protected it from creditors and some litigation, and provided Marvel with a ‘fresh start.’

Bad strategy: Diversified youth Entertainment Company
Bad execution: Overpaying for acquisitions
There’s a combination of bad strategy and bad execution
…show more content…
3. How do you recommend Marvel debt holders, specifically Marvel’s banks and the public debt holders/investors, to vote for the proposed restructuring plan?

The restructure plan might not be able to truly solve the problem but temporary relief the issue. Marvel needs to catch this opportunity with the newly gained liquidity and flexibility to make correct strategy and management plan. Without changes on the operation side of the company, Marvel could go back to the same result after years.

4. Estimate 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 WACC is calculated as an average value. Assume corporate bond return 8.12% (Baa) and the risk premium is assumed 7.5%. The tax rate is also assumed as 35%.

The average growth rate is estimated as the average of the future projected revenue growth rate.

With the WACC and the growth rate, the cash flow is calculated as:

The calculation shows that it’s worth Perelman to buy the new shares since he paid at 0.85 per share

5. Will it be difficult for Marvel or other companies in the MacAndrews and Forbes holding company to issue debt in the future? Why did the price of Marvel’s zero-coupon bonds drop on Tuesday, November 12, 1996? Why did portfolio managers

More about Bankruptcy and Restructuring at Marvel Entertainment Group