Mci

1934 Words Jul 3rd, 2006 8 Pages
MCI
CASE ANALYSIS:

PRESENTED: THURSDAY JUNE 15, 2006
MCI
CASE ANALYSIS
INTRODUCTION
MCI is at a critical point in their company history. After going public in 1972 they experienced several years of operating losses. Then in 1974 the FCC ordered MCI 's largest competitor AT&T to supply interconnection to MCI and the rest of the long distance market. With a more even playing field the opportunities to increase market share and revenue were significant. In order to maximize this opportunity MCI required capital. Their poor financial performance required them to use less traditional instruments to obtain financing. The capital acquired supported their growth until they reached a level of profitability in 1978. Subsequently they
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The shares carried a conversion price to common stock of $2.1875 per share. The call date for conversion was 15 months later in March of 1980. At the time of the issue MCI stock was trading at a price of $1.875. In 1977 MCI 's net income and profitability ratios had improved considerably and their forecast for 1978 earnings was in excess of $5,000,000. Debt ratios, dept to equity and return on equity ratios would all remain within an acceptable range after the issue. (see exhibit H). In addition the court had lifted a restriction on the "Execunet" service provided by MCI which was their fastest growing business and would make significant contributions to revenue and profitability in the years to come.
Nine months later in September of 1979 MCI raised the largest amount of financing in the company 's history by issuing 4,500,000 shares of senior convertible cumulative preferred stock with at $15 per share with total proceeds valued at $63,125,000. The conversion date was set for 20 months later in May 1981. This offering was supported by the improved actual and forecasted profitability of the company and the key ratios would remain in an acceptable range following the offering. (see exhibit I)
In July of 1980 MCI issued their first subordinated debenture at a rate of 15% due in the year 2000 raising $50,545,000 in capital. This rate was 346

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