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Case
| HBS Case Collection
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1996
First Capital Holdings Corp.
by
Stuart C. Gilson, Harry DeAngelo and Linda DeAngelo
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Abstract
The manager of a money-management firm considers whether to invest in the securities of a large, financially troubled, California-based life insurance holding company that holds 40% of its assets in high-yield junk bonds. Over the past year, the value of its portfolio has declined significantly, and it is seeking a large infusion of capital from its largest (28%) shareholder--a New York-based investment bank--that is experiencing financial difficulties of its own. Within the last month, another large California-based insurance company that also invested heavily in junk bonds was seized by regulators following a "run on the bank" by concerned policyholders, and the State Insurance Commissioner has publicly announced his intention to "crack down" on abuses in the insurance industry.
Keywords: Bonds;
Valuation;
Financial Institutions;
Investment Return;
Governing Rules, Regulations, and Reforms;
Fair Value Accounting;
Insurance Industry;
California;
Citation:
Gilson, Stuart C., Harry DeAngelo, and Linda DeAngelo. "First Capital Holdings Corp." Harvard Business School Case 296-032, May 1996.