Swedish Match

1834 WordsSep 21, 20158 Pages
Zach Savidge [Ying Jiang] Hugo Ou [Gabriel La Spada] ECO 363 4/13/2014 Swedish Match Case 1. The company will save 4.5%×4,000,000,000×28%= SEK 50,400,000 annually. We assume the debt Swedish Match issues is a 10-year maturity coupon bond as the average BBB corporate bond (the CFO believes Swedish Match will receive a BBB+ rating) with the yield closest to that of Swedish Match’s debt is the 10-year maturity. Moreover, we do not assume that this debt will be refinanced into perpetuity because the financing decisions of Swedish Match are clearly dynamic - the board will only decide on the issuance of this one bond as the upcoming board meeting, not whether the fixed debt level will be maintained through refinancing once the…show more content…
After it completes the share repurchase, the cash figure will decrease by SEK 4 billion and the market value of equity will decrease by SEK 4 billion. Balance Sheet | Pre-Repurchase | Post-Repurchase | | Cash & Short Term Investments | $7,002 | $3,002 | | Current Assets | $4,884 | $4,884 | | PP&E | $2,712 | $2,712 | | Other Assets | $4,300 | $4,300 | | Intangible Assets | $23,793 | $23,793 | | Total Assets | $42,691 | $38,691 | | | | | | | Current Liabilities | $3,776 | $3,776 | | Total Interest Bearing Debt | $7,529 | $7,529 | | | Of Which: Long-Term Debt | $6,559 | $6,559 | | Other Liabilities | $2,533 | $2,533 | | Equity including Minority Interests | $28,853 | $24,853 | | Total Liabilities & Equity | $42,691 | $38,691 | 4. Though the recapitalization will significantly increase Swedish Match’s leverage, even in the worst-case scenario - EBITDA declining to SEK 1.5 billion - Swedish Match should have sufficient cash
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