Case | HBS Case Collection | September 2011 (Revised September 2011)

Penn Warranty Corporation

by Richard S. Ruback and Royce Yudkoff


Penn Warranty Corporation sold warranty contracts to the used car market. During the recession in 2008/2009 Penn's sales declined by 26% Instead of growing by 11% as forecasted. Also, disruptions in financial and insurance markets created a cash shortfall. In the summer of 2009, Penn was facing the likelihood of default and possible foreclosure under its loan agreements. Its lender was refusing to waive covenants unless the company paid down $1 million of its outstanding debt of $7.75 million. The only source for such a refinancing was the equity investors who funded buyout of purchase of the company eighteen months earlier.


Ruback, Richard S., and Royce Yudkoff. "Penn Warranty Corporation." Harvard Business School Case 212-007, September 2011. (Revised from original August 2011 version.)