At the end of the third quarter until September 2002, the Chief Executive Office and Chief Financial Officer of Hexcel company considering a private equity offering of convertible preference shares for $ 125 million. Since the economic downturn and the terrorist attacks in the United States on 11 September 2001, the company has seen a big downturn in the industries they service – Hexcel is a leading company in the manufacture of composite materials, reinforcements and structures for a commercial .. . Read more »

At the end of the third quarter until September 2002, the Chief Executive Office and Chief Financial Officer of Hexcel company considering a private equity offering of convertible preference shares for $ 125 million. Since the economic downturn and the terrorist attacks in the United States on 11 September 2001, the company has seen a big downturn in the industries they service – Hexcel is a leading company in the manufacture of composite materials, reinforcements and structures for commercial aerospace, defense and electronics. The difficult external environment has been a decline of 16.4 percent in the year to date sales and the company had its bank covenant caused renegotiate agreements. While the company has responded with a major restructuring effort to cut $ 60 million costs, the CEO and CFO have to find the money for the repayment of $ 227 million over the next two years. With a leverage of 6.3 times debt to EBITDA and a recent downgrade of bonds CAA, the company is a crisis in the financing heading. Hexcel management has several options such as more debt, a sale of assets and three types of capital considered (primary offering, strategic investors and private equity). You have the option of narrowing a private equity offering and must evaluate the prices and the overall appropriateness of the proposed deal. This case is designed for students to determine the values ​​of securities under the terms of need. The students see the alternatives, the management team has evaluated and specifically looking at the details of private equity offerings.
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from
Basil A. Kalymon,
Jordan Mitchell
Source: Ivey Publishing
29 pages.
Release date: 30 May, 2005. Prod #: 905N03-PDF-ENG
Hexcel Company HBR case solution

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