Chapter | The Effects of Taxation on Multinational Corporations | 1995

Interest Allocation Rules, Financing Patterns, and the Operations of US Multinationals

Keywords: Corporation taxation; Interest deductibility; cost of capital; corporate finance; Accounting; Borrowing and Debt; Financing and Loans; Interest Rates;

Format: Print

Find at Harvard

Citation:

Froot, K. "Interest Allocation Rules, Financing Patterns, and the Operations of US Multinationals." In The Effects of Taxation on Multinational Corporations, edited by M. Feldstein, J. Hines, and G. Hubbard, 277–307. University of Chicago Press, 1995. (Also featured in The NBER Digest, November 1994. Revised from NBER Working Paper No. 4924.)

UAL is a large air transportation company with roots that go back to the 1920s. As a legacy carrier, going back to before the 1978 deregulation of air transportation markets, United Airlines is burdened with cost structures that make it difficult to compete with newer competitors. In addition, UAL has the burden of $7.6 billion in unfunded pension obligations and $2 billion in unfunded retiree health obligations. In June 2004, UAL is still operating under Chapter 11 bankruptcy protection, which began December 2002. It has needed extensions of the exclusivity period from the bankruptcy court. UAL's plan of reorganization is predicated on receiving $1.8 billion in loan guarantees from the Air Transport Stabilization Board (ATSB). But its request for loan guarantees from the ATSB was recently rejected. The company must decide what to do next and how to emerge from bankruptcy.

Kishore Karunakaran, President and COO of FFCM, faces a variety of challenges in launching an innovative investment management business in the rapidly evolving ETF space.

General Information

Academic Programs

Alumni

Faculty & Research

Recruit

Resources

Faculty & Research

Interest Allocation Rules, Financing Patterns, and the Operations of US Multinationals

About the Author

More from the Author

Contact

Related Links

Resources