Case | HBS Case Collection | November 2007 (Revised June 2011)

ISS A/S (A)

by Clayton S. Rose

Abstract

Provides the opportunity to examine the nature and extent of a company's responsibilities to its bondholders, and to develop an enhanced understanding of the challenges in managing contractual obligations, and circumstances under which business leaders might agree to terms outside the contract. Here, the context is a "going private" transaction in Europe, where the financing plan called for the addition to the company's balance sheet of a significant amount of new debt and a reshaping of the capital structure. While leveraged buyouts had been used in Europe for several years, this was likely the first LBO done with a company that had publicly traded investment grade debt outstanding. The increased debt from the deal would increase the risk to the company and to the existing bonds, and the bonds' prices would fall significantly as a result. Focuses on how the private equity buyers might consider the reaction of bondholders to the structure of the acquisition, and on their possible response. Students need to evaluate the transaction and its effect on the bonds, understand the principles governing contractual duties (and how they differ from fiduciary obligations), and account for a business and social culture outside the United States.

Keywords: Risk and Uncertainty; Bonds; Contracts; Private Equity; Leveraged Buyouts; Privatization; Business and Stakeholder Relations; Borrowing and Debt; Cross-Cultural and Cross-Border Issues; Europe;

Citation:

Rose, Clayton S. "ISS A/S (A)." Harvard Business School Case 308-054, November 2007. (Revised June 2011.)