Fin6315 Article


E. Huynink D. Ligtenberg

Valuation & Value Based Management

Bankruptcy and Restructuring at Miracle Entertainment Group

Case Study

Diederik Ligtenberg October, 2008

Example: Bankruptcy and Restructuring at Marvel Entertainment groupD. Ligtenberg Case Study: Personal bankruptcy and Restructuring at Wonder Entertainment group

Question one particular

Why do Marvel seek bankruptcy relief (Chapter 11)? Were the difficulties caused by misfortune, bad approach or bad execution? Even though the way Perelman ran Marvel Entertainment Group looked initially brilliant, Marvel had to seek bankruptcy relief in the end. Was this a matter of bad luck, bad technique or awful execution? While the demand intended for comic books heightened among the enthusiasts, the decision to enhance the number month to month titles and their price, induced the opposite of any high growth opportunity. Your decision to buy two companies, Fleer and SkyBox, in a ‘collector' segment, triggered a high publicity instead of a healthy diversification since both ‘collector' businesses began to fade resulting from the significantly less profitable and attractive collecting of comics and trading cards. For this reason bad technique is the main reason behind the problems and the eventual filing for Phase 11. The perception of both businesses as ‘entertainment', instead of ‘collectors' made it harder to recognise the influence of a change in technique which, for instance , made the core visitors of comics turn away. Particularly the acquisition of SkyBox, for a 25% premium, in a declining market segment increased the unwanted effects for Marvel. However , another factor results in when looking at these kinds of developments. Negative execution, as bad funding, can be seen an additional major determinant of the challenges. Looking at the debt ratios (table 1 below) in 95 a significant enhance is discovered. Because of the funding of SkyBox, Marvel added $ one hundred ninety mn of additional debt. This additional debts forced a serious increase in your debt ratio, and as a result also the chance of the company. Downgrades by score agencies and an advice to restructure its financial debt were given. The way Marvel choose for a more varied strategy can be justified. The shift to two decreasing businesses, and the way to finance this kind of switch may,

Table you Short Term Debt Current part Long Term Personal debt Long Term Debts Total Debt Total Collateral Debt Ratio

1992 zero 35, 1 201, a couple of 236, two 84, six 73, six %

93 0 45, 1 205, 1 two hundred and fifty, 2 147, 3 sixty two, 9 %

1994 zero 20, 2 364, one particular 384, three or more 243, zero 61, a few %

95 0 a few, 2 about 580, 3 586, 5 207, 8 73, 8 %

1996 (Q3) 28, six 625, 8 0 654, 5 180, 5 80, 4%

Example: Bankruptcy and Restructuring by Marvel Entertainment groupD. Ligtenberg Case Study: Personal bankruptcy and Reorganization, rearrangement, reshuffling at Marvel Entertainment group however , not really be validated. A further increase in its debts ratio did not cause a great upset and Marvels rankings were even more adjusted downwards.

Case Study: Individual bankruptcy and Restructuring at Marvel Entertainment groupD. Ligtenberg Case Study: Bankruptcy and Restructuring by Marvel Entertainment group

Question 2

Evaluate the proposed restructuring plan. • • Can it solve the difficulties that caused Marvel to file Chapter 10? As Carl Icann, the biggest unsecured debtholder, would you choose the suggested restricting strategy? Why or perhaps why not? The initial problems for Marvel were caused by negative strategy and bad loans. Although the market tendencies cannot be influenced and they are partially permanent the reorganization, rearrangement, reshuffling plan must focus on the financial situation and a possible strategic change. The restructuring strategy that Perelman proposes may solve the problems of Marvel filing for Chapter 14 partially.

Example: Bankruptcy and Restructuring in Marvel Entertainment groupD. Ligtenberg Case Study: Individual bankruptcy and Restructuring at Marvel Entertainment group

Question 3

How much is Marvel's equity well worth per share under the proposed restricting strategy assuming it acquires Doll Biz while planned? What is your assessment with the pro manera financial...

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