Carrefour Case Write-Up

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Carrefour S.A. Case Write-up In order to finance its ongoing expansion, Carrefour decided to issue EUR750 million 10-year bond through the eurobond market. Investment banks, like Morgan Stanley and UBS-Warburg had suggested that instead of issuing the bond with EUR, Carrefour could borrow British sterling pounds this time by taking the advantage of a temporary borrowing opportunity in the currency. Carrefour also faced three other alternatives of issuance: the bond could be issued at a coupon rate of 5.25% in euro, 3.625% in Swiss francs, or 5.5% in USD.
There are several considerations that Carrefour should take when it evaluated which currency it should issue the EUR debt. According to relative PPP equation,
%ΔS(foreign …show more content…

(See details and calculation in Exhibit 2.) The last consideration of issuing the debt is markup of different currencies. The markup equals to the difference between the bond’s issuing coupon rates and inter-bank interest rates of 10-year bond of four currencies. The calculation has shown that British pounds has the lowest markup among other three currencies. (See Exhibit 3) This 0.001% markup would greatly reduce default rate of the debt and make the debt more secured, also attracts more investors.
Exhibit 1

Exhibit 2


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