9-913-530
OCTOBER 22, 2012
W. CARL KESTER
SUNRU YONG
Winfield Refuse Management, Inc.:
Raising Debt vs. Equity
It was early June 2012, and Mamie Sheene was checking her team’s calculations yet again. The next board of directors meeting was in just two days, and she needed to be sure her presentation was perfect. As chief financial officer of Winfield Refuse Management, a vertically integrated, nonhazardous waste management company, it was Sheene’s responsibility to lead the discussion on how to finance a major acquisition. This question had led to contentious debate at the last board meeting, and she needed to make sure that the board could reach a resolution this time.
Industry Background
In the United States, waste
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Winfield’s assets included 22 landfills and 26 transfer stations and material recovery facilities, which served 33 collections operations. Although the Winfield family kept several seats on the board, outside professional management had been brought in during the 1980s. The current CEO, Leo Staumpe, had previously managed the Michigan operation and served as COO before being promoted to CEO in 1997.
Since its founding, Winfield’s board had adhered to a consistent policy of avoiding long-term debt. The steady cash flow generated by the business, short-term bank loans, and the proceeds of the
1991 public stock offering had been sufficient to meet its financing needs. As of 2012, the capital structure consisted of common stock, with no interest-bearing debt. The Winfield family and senior management held 79% of the common stock. The remaining shares were widely distributed and traded infrequently in the over-the-counter market.
Expansion Opportunity
In its early years, Winfield relied primarily on organic growth to expand its operation. Starting in the early 1990s, the company made a series of small, “tuck-in” acquisitions. It targeted companies that would extend its geographic reach while creating economies of scale with its existing facilities.
The management team had proven successful in the post-acquisition phase, avoiding undue disruption while
Ms. Smith, would like for you to meet her in the lobby ten minutes before the hearing begins. She asked, that you bring the pictures of all the comparable
Dean Buntrock established Waste Management, Inc. in 1968. Its main purpose is to pick recycling and garbage up from residential housing and businesses. WM also disposes of the garbage in landfills. It has grown to be the largest garbage disposal company in the U.S. today. This company has managed to survive “one of the most egregious accounting frauds we have seen” said Thomas C. Newkirk of the SEC.
The meeting was called to order promptly at 7 PM by Board President Steve Ehrlich. There were
R&D. In the first round, we tried to maintain a presence in every segment of our products by improving the performance and decreasing the size. We improved all of our products
Andrea Winfield considered issuing bonds was not a good option for financing the acquisition. She was particularly concerned about the increasing long-term debt and annual cash layout of $ 6.25 million for 15 years. We believe that her concerns are justified, because the Company had already significant amount of debt that could result in higher risks and stock price
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2. New bank credit facility, 600 million cash on hand to take advantage of opportunities that may arise
The Board President called the meeting to order, and the board secretary did the roll call. The agenda was comprised of various reports and the secretary would go though each agenda item, beginning with the board secretary’s report, finance, personnel, listing of approvals for salaries that included names of staff/faculty, retirements, leave of absences, bills, travel, field trips, etc.
Debt capital: borrowing someone else’s money to finance the business under the condition that the money plus accrued interest must be paid back in full by an agreed upon date in the future
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firm’s financing, for example, issuing or repurchasing stock and borrowing or repaying loans. It also
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