Stuart C. Gilson

Steven R. Fenster Professor of Business Administration

Professor Stuart Gilson is the Steven R. Fenster Professor of Business Administration at the Harvard Business School, and former chairman of the Finance Area of the School.  Professor Gilson’s research, teaching, and consulting activities focus on the operational, financial, and legal strategies that companies use to revitalize their business, improve performance, and create value when operating in a challenging business environment.  He is an expert on business valuation, corporate financial analysis, financial strategy, credit analysis, and corporate restructuring.  

Professor Gilson’s research has been published by leading academic and practitioner journals and has been cited by the national news media, including The Wall Street Journal, The New York Times, Business Week, and Bloomberg.  His work has received numerous honors, including the prestigious Graham and Dodd Award for his article on investment strategies used by credit-oriented investors to acquire control and create value in highly leveraged companies. 

For the last twenty years he has taught one of the most popular courses in Harvard’s MBA curriculum, Creating Value Through Corporate Restructuring.  He has also taught extensively in Harvard’s Executive Education programs, including the Advanced Management Program, Finance for Senior Executives, and Corporate Restructuring, Mergers and Acquisitions.  

Professor Gilson has written more than sixty Harvard Business School case studies and teaching notes that are used in business schools throughout the world.  A number of these cases have been published in his book Creating Value Through Corporate Restructuring (John Wiley & Sons), now in its second edition.  

Professor Gilson has served as a consultant for a variety of companies and organizations.  He has provided focused executive training programs for a number of Fortune 500 companies.  He has served on the advisory boards of various for-profit and non-profit organizations, including the Turnaround Management Association (as co-chair) and several investment funds.  He serves as a litigation expert on business valuation, credit analysis, and corporate restructuring.  He is an academic affiliate of Cornerstone Research, a leading economic consulting firm. 

Professor Gilson received his B.A. degree from the University of Manitoba; his Masters degree from the University of British Columbia; and his Ph.D. in Finance from the University of Rochester, New York.  He lives with his wife in the town of Brookline, Massachusetts.






 

Books

  1. Creating Value through Corporate Restructuring: Case Studies in Bankruptcies, Buyouts, and Breakups

    A collection of case studies illustrates real-world techniques, implementation, and strategies on corporate restructuring. Over the period 1981-1998, public companies with combined assets of over half a trillion dollars filed for Chapter 11 bankruptcy. Over the same period, over 400 public companies underwent corporate spin-offs, divesting businesses valued at more than $250 billion. Each of these companies, and all of these dollars, were in some way or another involved in corporate restructuring. Gilson's case studies have been used extensively in executive programs and are perfect tools to refer to when faced with real-world corporate restructuring issues.

    Keywords: Restructuring; Insolvency and Bankruptcy; Management Analysis, Tools, and Techniques; Public Ownership; Value Creation;

Journal Articles

  1. Do Analysts Add Value When They Most Can? Evidence from Corporate Spinoffs

    This paper investigates how securities analysts help investors understand the value of diversification. By studying the research that analysts produce about companies that have announced corporate spinoffs, we gain unique insights into how analysts portray diversified firms to the investment community. We find that while analysts' research about these companies is associated with improved forecast accuracy, the value of their research about the spun-off subsidiaries is more limited. For both diversified firms and their spun-off subsidiaries, analysts' research is more valuable when information asymmetry between the management of these entities and investors is higher. These findings contribute to the corporate strategy literature by shedding light on the roots of the diversification discount and by showing how analysts' research enables investors to overcome asymmetric information.

    Keywords: analysts; Spin-offs; diversification discount; information asymmetry; corporate strategy; Value Creation; Business Subsidiaries; Diversification; Corporate Strategy; Investment;

    Citation:

    Feldman, Emilie, Stuart C. Gilson, and Belen Villalonga. "Do Analysts Add Value When They Most Can? Evidence from Corporate Spinoffs." Strategic Management Journal (forthcoming). (Winner, "Distinguished Paper Award," 2012 Academy of Management Meetings (Business Policy & Strategy Division)) View Details
  2. Valuation of Bankrupt Firms

    This study compares the market value of firms that reorganize in bankruptcy with estimates of value based on management's published cash flow projections. We estimate firm values using models that have been shown in other contexts to generate relatively precise estimates of value. We find that these methods generally yield unbiased estimates of value, but the dispersion of valuation errors is very wide—the sample ratio of estimated value to market value varies from less than 20% to greater than 250%. Cross-sectional analysis indicates that the variation in these errors is related to empirical proxies for claimholders' incentives to overstate or understate the firm's value.

    Keywords: Valuation; Business Ventures; Insolvency and Bankruptcy;

    Citation:

    Gilson, S. C., E. S. Hotchkiss, and R. S. Ruback. "Valuation of Bankrupt Firms." Review of Financial Studies 13, no. 7 (spring 2000): 43–74. (Abridged version reprinted in The Journal of Corporate Renewal 13, no. 7 (July 2000)) View Details
  3. Transactions Costs and Capital Structure Choice: Evidence from Financially Distressed Firms

    This study provides evidence that transactions costs discourage debt reductions by financially distressed firms when they restructure their debt out of court. As a result, these firms remain highly leveraged and one-in-three subsequently experience financial distress. Transactions costs are significantly smaller, hence leverage falls by more and there is less recurrence of financial distress, when firms recontract in Chapter 11. Chapter 11 therefore gives financially distressed firms more flexibility to choose optimal capital structures.

    Keywords: Cost; Capital Structure; Decision Choices and Conditions; Information; Finance; Business Ventures;

    Citation:

    Gilson, S. C. "Transactions Costs and Capital Structure Choice: Evidence from Financially Distressed Firms." Journal of Finance 52, no. 1 (March 1997): 161–196. (Abstracted in Contemporary Finance Digest 1 (autumn 1997)) View Details
  4. Perceptions and the Politics of Finance: Junk Bonds and the Regulatory Seizure of First Capital Life

    In May 1991, one month after seizing Executive Life, California regulators seized First Capital Life (FCLIC). Both insurers were Drexel clients with large junk bond holdings, and both had experienced 'bank runs.' FCLIC's run followed regulators' televised comments that its poor condition necessitated a substantial cash infusion. Yet FCLIC's statutory capital — with junk bonds, real estate, and mortgages marked to market — was far from lowest among major insurers with California policyholders. It becomes lowest if junk bonds alone are marked to market at year-end 1990 (ignoring larger market declines in real estate/mortgages and the junk bond market's 21% return in early 1991). Our findings suggest a regulatory bias against junk bonds in the political backlash against the 1980s.

    Keywords: Finance; Bonds; Governing Rules, Regulations, and Reforms;

    Citation:

    Gilson, S. C., H. DeAngelo, and L. DeAngelo. "Perceptions and the Politics of Finance: Junk Bonds and the Regulatory Seizure of First Capital Life." Journal of Financial Economics 41 (July 1996): 475–511. View Details
  5. Investing in Distressed Situations: A Market Survey

    The risks of investing in distressed companies—a practice popularly known as "vulture" investing—are highly firm specific and idiosyncratic. Investors who are adept at managing these risks, who understand the legal rules that must be followed in corporate bankruptcy, and who are skilled at identifying or creating value in a distressed situation consistently earn the highest returns in this market. Among the key characteristics of those who are successful in this market are: 1. a superior ability to value a firms' assets, 2. a superior negotiating and bargaining skill, 3. an understanding of the risks of investing in distressed situations.

    Keywords: Investment; Markets;

    Citation:

    Gilson, S. C. "Investing in Distressed Situations: A Market Survey." Financial Analysts Journal (November/December 1995): 8–27. View Details
  6. The Collapse of First Executive Corporation: Junk Bonds, Adverse Publicity, and the Run on the Bank Phenomenon

    In April 1991, regulators seized the major subsidiaries of First Executive Corporation (FE), an insurer that invested heavily in junk bonds. During the junk bond market turmoil of 1989–1990, adverse publicity fueled a bank run at FE, forcing a $4 billion portfolio liquidation before the market rose 50–60% in 1991–1992. More traditional insurers did not receive commensurate press coverage, despite their substantial exposure to real estate declines, which were roughly 2.5 times the junk bond decline. Seizure of FE's subsidiaries was defensible, although FE would have become solvent within a year, given average junk bond market appreciation.

    Keywords: Business Ventures; Bonds; Banks and Banking;

    Citation:

    Gilson, S. C., H. DeAngelo, and L. DeAngelo. "The Collapse of First Executive Corporation: Junk Bonds, Adverse Publicity, and the Run on the Bank Phenomenon." Journal of Financial Economics 36 (March 1994): 287–336. View Details
  7. CEO Compensation in Financially Distressed Firms: An Empirical Analysis

    Keywords: Management; Compensation and Benefits; Business Ventures;

    Citation:

    Gilson, S. C., and M. R. Vetsuypens. "CEO Compensation in Financially Distressed Firms: An Empirical Analysis." Journal of Finance 43 (June 1993): 425–458. (Abstracted in Financial Management Collection 7 (winter 1992) and 9 (fall 1994)) View Details
  8. Bankruptcy, Boards, Banks, and Blockholders: Evidence on Changes in Corporate Ownership and Control When Firms Default

    In 111 publicly traded firms that either file for bankruptcy or privately restructure their debt between 1979 and 1985, bank lenders frequently become major stockholders or appoint new directors. On average, only 46% of incumbent directors remain when bankruptcy or debt restructuring ends. Directors who resign hold significantly fewer seats on other boards following their departure. Common-stock ownership becomes more concentrated with large blockholders and less with corporate insiders. Few firms are acquired. Collectively, these results suggest that corporate default leads to significant changes in the ownership of firms' residual claims and in the allocation of rights to manage corporate resources.

    Keywords: Insolvency and Bankruptcy; Governance; Banks and Banking; Change; Business Ventures; Ownership;

    Citation:

    Gilson, S. C. "Bankruptcy, Boards, Banks, and Blockholders: Evidence on Changes in Corporate Ownership and Control When Firms Default." Journal of Financial Economics 27, no. 2 (October 1990): 355–387. View Details
  9. Troubled Debt Restructurings: An Empirical Analysis of Private Reorganization of Firms in Default

    This study investigates the incentives of financially distressed firms to restructure their debt privately rather than through formal bankruptcy. In a sample of 169 financially distressed companies, about half successfully restructure their debt outside of Chapter 11. Firms more likely to restructure their debt privately have more intangible assets, owe more of their debt to banks, and owe fewer lenders. Analysis of stock returns suggests that the market is also able to discriminate ex ante between the two sets of firms, and that stockholders are systematically better off when debt is restructured privately.

    Keywords: Theory; Insolvency and Bankruptcy; Restructuring;

    Citation:

    Gilson, S. C., J. Kose, and L. H. P. Kang. "Troubled Debt Restructurings: An Empirical Analysis of Private Reorganization of Firms in Default." Journal of Financial Economics 27, no. 2 (October 1990): 315–353. View Details

Book Chapters

  1. Bankruptcy, Boards, Banks, and Blockholders: Evidence on Changes in Corporate Ownership and Control When Firms Default

    Keywords: Insolvency and Bankruptcy; Organizational Change and Adaptation; Ownership; Governing and Advisory Boards; Banks and Banking; Banking Industry;

    Citation:

    Gilson, S. C. "Bankruptcy, Boards, Banks, and Blockholders: Evidence on Changes in Corporate Ownership and Control When Firms Default." In Empirical Corporate Finance, edited by Michael J. Brennan. Glos: Edward Elgar Publishing, 2001. View Details
  2. Managing Default: Some Evidence on How Firms Choose between Workouts and Chapter 11

    Keywords: Insolvency and Bankruptcy; Decision Choices and Conditions; Business or Company Management;

    Citation:

    Gilson, S. C. "Managing Default: Some Evidence on How Firms Choose between Workouts and Chapter 11." In High Yield Bonds: Market Structure, Valuation, and Portfolio Strategies, edited by T. M. Barnhill, W. F. Maxwell, and M. R. Shenkman. New York: McGraw-Hill, 1999. View Details
  3. CEO Compensation in Financially Distressed Firms: An Empirical Analysis

    Keywords: Executive Compensation; Insolvency and Bankruptcy;

    Citation:

    Gilson, S. C., and M. R. Vetsuypens. "CEO Compensation in Financially Distressed Firms: An Empirical Analysis." In The Economics of Executive Compensation, edited by Kevin Hallock and Kevin Murphy. U.K.: Edward Elgar Publishing, 1999. View Details
  4. Some Methodological Issues in Cross-country Comparisons of Commercial Bankruptcy Law

    Keywords: Insolvency and Bankruptcy; Law; Cross-Cultural and Cross-Border Issues; Research;

    Citation:

    Gilson, S. C. "Some Methodological Issues in Cross-country Comparisons of Commercial Bankruptcy Law." In International and Comparative Corporate Insolvency Law, edited by J. S. Ziegel. Oxford: Oxford University Press, 1994. View Details
  5. Managing Default: Some Evidence on How Firms Choose between Workouts and Chapter 11

    Keywords: Insolvency and Bankruptcy; Decision Choices and Conditions;

    Citation:

    Gilson, S. C. "Managing Default: Some Evidence on How Firms Choose between Workouts and Chapter 11." In Corporate Bankruptcy: Economic and Legal Perspectives, edited by J. Bhandari. Cambridge University Press, 1994. View Details
  6. Troubled Debt Restructurings: An Empirical Analysis of Private Reorganization of Firms in Default

    Keywords: Insolvency and Bankruptcy; Restructuring; Borrowing and Debt;

    Citation:

    Gilson, S. C. "Troubled Debt Restructurings: An Empirical Analysis of Private Reorganization of Firms in Default." In Studies in Financial Institutions: Commercial Banks, edited by C. W. Smith and C. James. New York: McGraw-Hill, 1993. View Details
  7. Bankruptcy, Boards, Banks, and Blockholders: Evidence on Changes in Corporate Ownership and Control When Firms Default

    Keywords: Insolvency and Bankruptcy; Organizational Change and Adaptation; Ownership; Governing and Advisory Boards; Banks and Banking; Banking Industry;

    Citation:

    Gilson, S. C. "Bankruptcy, Boards, Banks, and Blockholders: Evidence on Changes in Corporate Ownership and Control When Firms Default." In Bankruptcy and Distressed Restructurings: Analytical Issues and Investment Opportunities, edited by Edward I. Altman. New York: Business One Irwin, 1992. View Details
  8. Troubled Debt Restructurings: An Empirical Analysis of Private Reorganization of Firms in Default

    Keywords: Insolvency and Bankruptcy; Borrowing and Debt; Restructuring;

    Citation:

    Gilson, S. C., J. Kose, and L.H.P. Kang. "Troubled Debt Restructurings: An Empirical Analysis of Private Reorganization of Firms in Default." In Bankruptcy and Distressed Restructurings: Analytical Issues and Investment Opportunities, edited by Edward I. Altman. New York: Business One Irwin, 1992. View Details

Working Papers

  1. When Do Analysts Add Value? Evidence from Corporate Spinoffs

    We investigate the information content and forecast accuracy of 1,793 analyst reports written around 62 spinoffs—a setting in which analysts' ability to inform investors is potentially very high. We find that analysts pay little attention to subsidiaries about to be spun off even though these subsidiaries constitute a significant part of the parent company operations. Moreover, while the level of detail in analyst research about parent companies is significantly related to EPS and price forecast accuracy, the same is not true for the subsidiaries. We establish that this "forgotten child" phenomenon is linked to a "neglected parent" effect, whereby inaccuracy in subsidiary earnings forecasts is associated with inaccuracy in parent estimates. We conclude by showing that spinoffs may be a particularly complex setting for analysts to evaluate relative to other forms of corporate restructuring, such as IPOs, mergers, or bankruptcies, providing one potential explanation for our findings.

    Keywords: Earnings Management; Mergers and Acquisitions; Business Subsidiaries; Restructuring; Forecasting and Prediction; Insolvency and Bankruptcy; Initial Public Offering; Price; Reports; Research;

    Citation:

    Feldman, Emilie Rose, Stuart Gilson, and Belen Villalonga. "When Do Analysts Add Value? Evidence from Corporate Spinoffs." Harvard Business School Working Paper, No. 10-102, May 2010. View Details

Cases and Teaching Materials

  1. Thomas Cook Group on the Brink

    Harriett Green, the newly appointed CEO of Thomas Cook Group, faces a daunting set of business and financial challenges at the 171-year old UK travel services company. The company has lost almost £600 million in the last three quarters; has seen its stock price fall from 230 pence to a low of 8.8 pence in the past two years; and had seen its bonds trade down to as little as 40% of face value. In just a few weeks the company's license to operate is to be reviewed by the United Kingdom's Civil Aviation Authority, competitors are publicly questioning the company's viability, and seasonal working capital needs are about to peak. With the company's very survival at stake, Green must devise a turnaround plan that will return the company to financial health. Any plan must address the company's high cost structure, raise substantial new capital, fix the balance sheet, create a profitable growth strategy, and build a more effective organization and culture. But achieving all of these objectives within the short time available will be a major challenge.

    Keywords: turnaround; corporate restructuring; change leadership; female ceo; Change Management; Communication Strategy; Borrowing and Debt; Cash Flow; Cost Management; Financial Liquidity; Financial Management; Executive Compensation; Leading Change; Crisis Management; Value Creation; Travel Industry; United Kingdom;

    Citation:

    Esty, Benjamin C., Stuart C. Gilson, and Aldo Sesia. "Thomas Cook Group on the Brink." Harvard Business School Case 215-008, August 2014. View Details
  2. School Specialty, Inc.

    Set in 2013, School Specialty was a financially troubled supplier of educational products to primary and secondary schools in the United States. The company planned to file Chapter 11 in order to address its excessive debt load, but needed to arrange debtor-in-possession financing to provide liquidity while in bankruptcy. The company has received a financing proposal from its existing term loan lender that includes some aggressive and unusual features. This includes the requirement that, immediately upon filing for Chapter 11, School Specialty undertake to sell its assets under Section 363 of the U.S. Bankruptcy Code. The Company must decide whether to accept this proposal, and what other options may be available.

    Keywords: School Specialty; bankruptcy; section 363; capital structure; financing; chapter 11; Capital Structure; Financing and Loans; Insolvency and Bankruptcy; Distribution Industry; Education Industry; United States;

    Citation:

    Gilson, Stuart, and Kristin Mugford. "School Specialty, Inc." Harvard Business School Case 214-084, February 2014. View Details
  3. Arch Wireless, Inc. (B): Food for Vultures

    In 2002, a hedge fund investor acquires the distressed bank debt of a bankrupt wireless paging company and converts his holding into common stock of the reorganized entity. Determining his likely return from this investment is challenging, given that the entire wireless paging industry is in precipitous decline, as paging technology is being rapidly replaced by newer technologies.

    Keywords: bankruptcy reorganization; wireless technology; distress investing; restructuring; capital structur; Capital Structure; Restructuring; Investment Funds; Insolvency and Bankruptcy; Borrowing and Debt; Wireless Technology; Telecommunications Industry;

    Citation:

    Gilson, Stuart C. "Arch Wireless, Inc. (B): Food for Vultures." Harvard Business School Supplement 214-034, November 2013. View Details
  4. W.R. Grace & Co: Dealing with Asbestos Torts

    A manufacturer of buildng prducts and specialty chemicals, W. R. Grace & Co. filed for Chapter 11 bankruptcy in 2001 in response to a flood of lawsuits alleging that its products contained asbestos, and had caused hundreds of thousands of people to contract asbestos-related diseases such as mesothelioma and lung cancer. Nine years later, Grace is poised to emerge from bankruptcy with a plan of reorganization that provides for the establishment of two special purpose trusts through which all current and future asbestos claims will be channeled, allowing the company to survive as an ongoing business. However, the company and asbestos claimholders' committees materially disagree over the size of the company's liability for asbestos, and have hired experts to value the liability. Grace's expert argues the liability is worth between $83 million and $173 million, while the plaintiff's expert argues the liability could be as high as $6.2 billion.

    Keywords: restructuring; valuation; capital structure; crisis management; bankruptcy reorganization; business failures; environmental regulations; class action lawsuits; Natural Environment; Valuation; Health Disorders; Capital Structure; Restructuring; Lawsuits and Litigation; Chemicals; Crisis Management; Insolvency and Bankruptcy; Legal Liability; Construction Industry; Chemical Industry; United States;

    Citation:

    Gilson, Stuart C., and Sarah L. Abbott. "W.R. Grace & Co: Dealing with Asbestos Torts." Harvard Business School Case 213-046, December 2012. (Revised February 2013.) View Details
  5. General Growth Properties and Pershing Square Capital Management

    Keywords: real estate; Real Estate Industry;

    Citation:

    Segel, Arthur I., Stuart C. Gilson, Thomas Edward Follett Langer, Zubin Gopal Malkani, and John Anthony Mascari. "General Growth Properties and Pershing Square Capital Management." Harvard Business School Case 212-109, May 2012. (Revised July 2012.) View Details
  6. Countrywide plc (CW)

    One of the world's leading investors in distressed companies, Oaktree Capital Management is contemplating a "loan to own" investment in the debt f Countrywide plc, a financially troubled residential real estate agent based in the U.K. Only sixteen months earlier, Countrywide was acquired by a private equity investor Apollo Management L.P. in a leveraged buyout. Although Countrywide is the largest real estate agent in the U.K., and has a strong portfolio of assets, its economic fortunes have declined suddenly with the widespread collapse of global financial and real estate markets, putting it in danger of defaulting on its debt and having to restructure under a U.K. Scheme of Arrangement.

    Keywords: Leveraged Buyouts; Restructuring; Economic Slowdown and Stagnation; Assets; Borrowing and Debt; Private Equity; Insolvency and Bankruptcy; Investment Portfolio; Crisis Management; Strategy; Valuation; Real Estate Industry; United Kingdom;

    Citation:

    Gilson, Stuart C., and Sarah L. Abbott. "Countrywide plc (CW)." Harvard Business School Spreadsheet Supplement 211-714, March 2011. View Details
  7. Countrywide plc

    One of the world's leading investors in distressed companies, Oaktree Capital Management, is contemplating a "loan to own" investment in the debt of Countrywide plc, a financially troubled residential real estate agent based in the U.K. Only sixteen months earlier, Countrywide was acquired by private equity investor Apollo Management L.P. in a leveraged buyout. Although Countrywide is the largest real estate agent in the U.K., and has a strong portfolio of assets, its economic fortunes have declined suddenly with the widespread collapse of global financial and real estate markets, putting it in danger of defaulting on its debt and having to restructure under a U.K. Scheme of Arrangement.

    Keywords: Mergers and Acquisitions; Restructuring; Financial Crisis; Capital Structure; Insolvency and Bankruptcy; Financial Management; Investment; Real Estate Industry; United Kingdom;

    Citation:

    Gilson, Stuart C., and Sarah L. Abbott. "Countrywide plc." Harvard Business School Case 211-026, February 2011. View Details
  8. Houghton Mifflin Harcourt (CW)

    One of the leading publishers of textbooks and other educational materials for the U.S. K-12 educational instruction market has suffered a dramatic decline in sales and profits in the wake of the 2008-2009 financial market crisis and economic recession, and it now overburdened with debt. To regain its competitiveness, the company has to significantly reduce its debt, by billions of dollars. Company management is trying to decide which of several options is best for achieving this goal, including filing for Chapter 11 bankruptcy, restructuring its debt out-of-court, or filing a "pre-packaged" Chapter 11 bankruptcy.

    Keywords: Restructuring; Decisions; Economic Slowdown and Stagnation; Borrowing and Debt; Insolvency and Bankruptcy; Profit; Crisis Management; Goals and Objectives; Sales; Competition; Publishing Industry; United States;

    Citation:

    Gilson, Stuart C., and Sarah Abbott. "Houghton Mifflin Harcourt (CW)." Harvard Business School Spreadsheet Supplement 211-708, February 2011. View Details
  9. Houghton Mifflin Harcourt

    One of the leading publishers of textbooks and other educational materials for the U.S. K-12 educational instruction market has suffered a dramatic decline in sales and profits in the wake of the 2008-2009 financial market crisis and economic recession, and it now overburdened with debt. To regain its competitiveness. the company has to significantly reduce its debt, by billions of dollars. Company management is trying to decide which of several options is best for achieving this goal, including filing for Chapter 11 bankruptcy, restructuring its debt out-of-court, or filing a “pre-packaged” Chapter 11 bankruptcy.

    Keywords: Restructuring; Decision Choices and Conditions; Financial Crisis; Insolvency and Bankruptcy; Publishing Industry; Massachusetts;

    Citation:

    Gilson, Stuart C., and Sarah L. Abbott. "Houghton Mifflin Harcourt." Harvard Business School Case 211-027, January 2011. View Details
  10. Groupe Eurotunnel S.A. (A)

    In the summer of 2006, the chairman and CEO of Eurotunnel Group is faced with the decision whether to file for bankruptcy protection, after having failed to gain creditor approval of an ambitious out-of-court restructuring plan. The company, which has been attempting to restructure its debt and operations for the last ten years, faces a number of daunting challenges. Eurotunnel is jointly listed in the U.K. and France, and its shareholders, who are largely based in France, face the prospect of significant dilution under any restructuring plan. The current chairman and CEO has been with the company for only a year and a half, following a decade of senior management turbulence in which the company has seen nine different CEOs and chairmen. Eurotunnel's capital structure is staggeringly complex, and a large fraction of its debt has come to be held by U.S.-based hedge funds that specialize in investing in distressed companies. Finally, Eurotunnel's business is extremely challenging to value and is faced with significant competition. If the current chairman/CEO decides to file for bankruptcy, he faces the additional choice of whether to file for bankruptcy in the U.K. or in France, which take quite different approaches to restructuring troubled companies.

    Keywords: Restructuring; Capital Structure; Insolvency and Bankruptcy; Laws and Statutes; Risk Management; Rail Industry; France; United Kingdom;

    Citation:

    Gilson, Stuart C., Vincent Marie Dessain, and Sarah Abbott. "Groupe Eurotunnel S.A. (A)." Harvard Business School Case 209-062, March 2009. (Revised March 2010.) View Details
  11. Adelphia Communications Corp.'s Bankruptcy

    In 2002, a massive accounting fraud and corporate looting scandal involving the founding Rigas family made Adelphia the 11th largest bankruptcy case in history, and the third-after WorldCom and Enron-among those triggered by fraud. Set in 2005, when Adelphia is contemplating several options to emerge from bankruptcy, including a $17.6 billion cash-and-stock offer from Time Warner and Comcast, a $17.1 billion cash-only offer from Cablevision, and a $15 billion cash-only offer from KKR and Providence. The fact that both Comcast and Cablevision are themselves family-controlled and with a large wedge between the family's ownership and control rights further complicates the decision.

    Keywords: Family Business; Restructuring; Crime and Corruption; Insolvency and Bankruptcy; Corporate Governance; Governance Controls; Family Ownership;

    Citation:

    Gilson, Stuart C., and Belen Villalonga. "Adelphia Communications Corp.'s Bankruptcy." Harvard Business School Case 208-071, October 2007. (Revised February 2010.) View Details
  12. Lyondell Chemical Company

    Hit with an industry recession and the global financial crisis of 2008, in January 2009 LyondellBasell Industries AF S.C.A., one of the world's largest internationally diversified chemical companies headquartered in The Netherlands, placed its U.S. operations and a German subsidiary under U.S. Chapter 11 bankruptcy protection. To successfully reorganize as a going concern, the company sought to raise over $8 billion in a super-priority "Debtor-in-Possession (DIP)" loan from a group of 13 financial institutions, including commercial banks, investment banks, hedge funds, and private equity funds. Representing one of the largest DIP loans in history, this financing was considered critical to the company's survival. One unique and controversial feature of the financing was a $3.25 billion “roll-up” facility, under which a number of Lyondell's pre-bankruptcy lenders were allowed to significantly elevate the priority of debts they were already owed (so that they ranked ahead of all other pre-bankruptcy debts owed by the company), provided the lenders advanced new loans to the company to help finance its restructuring. With a costly liquidation as the alternative, various creditor groups objected to the DIP financing package, putting Lyondell's reorganization, and survival as a going concern, at significant risk.

    Keywords: Restructuring; Financial Crisis; Borrowing and Debt; Capital Structure; Insolvency and Bankruptcy; Financing and Loans; International Finance; Crisis Management; Chemical Industry; Netherlands; United States;

    Citation:

    Gilson, Stuart C., and Sarah Abbott. "Lyondell Chemical Company." Harvard Business School Case 210-001, December 2009. (Revised February 2010.) View Details
  13. Buenos Aires Embotelladora S.A. (BAESA): A South American Restructuring

    In 1998, BAESA, PepsiCo's largest bottler and distributor outside North America, experienced severe financial difficulty and had to restructure its debt and business operations to avoid bankruptcy or liquidation. Based in Argentina, with operations throughout South America, the company had for years been a spectacular success story and media darling, until it undertook an ill-fated expansion in Brazil. The company's debt was owed to banks and financial institutions in South America, Asia, Europe, and the United States. In addition, the company had $60 million of publicly traded bonds, much of them held by U.S. investors. The restructuring was the largest and most complicated undertaking of its kind ever taken in South America. In addition to negotiating with its bankers and making a public exchange offer for its bonds, the company made a massive common stock rights offering to its shareholders, giving them the opportunity to purchase new stock in the company. It also considered filing a "prepackaged" Chapter 11 bankruptcy in the United States to pressure U.S. bondholders to go along with the plan. The negotiations were greatly complicated by differences in the bankruptcy laws of Argentina, Brazil, and the United States.

    Keywords: Restructuring; Borrowing and Debt; Insolvency and Bankruptcy; Bonds; Stocks; Multinational Firms and Management; Laws and Statutes; United States; Argentina; Brazil;

    Citation:

    Gilson, Stuart C., and Gustavo A. Herrero. "Buenos Aires Embotelladora S.A. (BAESA): A South American Restructuring." Harvard Business School Case 202-009, September 2001. (Revised July 2009.) View Details
  14. Delphi Corp. and the Credit Derivatives Market (A)

    In 2005, Jane Bauer-Martin, a hedge fund manager, is considering what she should do with the fund's large investment in the publicly traded bonds of Delphi Corp., a financially troubled auto parts supplier. Delphi is General Motor's key auto parts supplier, and, like GM, it is burdened with large pension and other retiree liabilities that threaten to push it into bankruptcy. Bauer-Martin is considering using various credit derivatives (credit default swaps, credit-linked notes, credit default swap indices, total return swaps, etc.) to hedge her position in Delphi debt, or to speculate on future Delphi bond prices.

    Keywords: Borrowing and Debt; Insolvency and Bankruptcy; Credit Derivatives and Swaps; Bonds; Financial Management; Risk Management;

    Citation:

    Gilson, Stuart C., Victoria Ivashina, and Sarah Abbott. "Delphi Corp. and the Credit Derivatives Market (A)." Harvard Business School Case 210-002, July 2009. (Revised July 2009.) View Details
  15. Restructuring at Delphi Corporation (A)

    Delphi Corporation, operating under Chapter 11 bankruptcy protection, has filed a plan of reorganization with the court, under which a consortium of hedge funds led by Appaloosa Management will invest up to $2.6 billion in new equity. Also participating in the plan is General Motors which, as the former parent of Delphi, has agreed to fund a portion of the massive pension and retiree health care liabilities that Delphi incurred when it separated from GM in a prior spin-off. The company has also had to seek significant financial concessions from the United Auto Workers, without which it may not survive as a going concern. Greatly complicating the negotiations is the significant uncertainty surrounding the value of Delphi's business and the complexity of its capital structure.

    Keywords: Restructuring; Capital Structure; Private Equity; Insolvency and Bankruptcy; Investment Funds; Labor and Management Relations; Auto Industry; Service Industry;

    Citation:

    Gilson, Stuart C., and Sarah L. Abbott. "Restructuring at Delphi Corporation (A)." Harvard Business School Case 208-069, January 2008. (Revised May 2009.) View Details
  16. Kmart and ESL Investments (A)

    A major bankrupt retailer is poised to emerge from Chapter 11. Two activist hedge funds ("vulture investors") will own over 50% of reorganized Kmart's common stock, based on prior investments in Kmart's debt claims, and an infusion of new equity financing. The Chapter 11 process has generated both costs and benefits for the company. Its future profitability, and the value of the reorganized business, are both highly uncertain.

    Keywords: Restructuring; Capital Structure; Insolvency and Bankruptcy; Investment; Investment Activism; Valuation; Financial Services Industry; Retail Industry; United States;

    Citation:

    Gilson, Stuart C., and Sarah Abbott. "Kmart and ESL Investments (A)." Harvard Business School Case 209-044, August 2008. (Revised May 2009.) View Details
  17. Note on the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)

    In 2005, new legislation was passed by the U.S. Congress and signed into law by the President that introduced a number of major amendments to U.S. bankruptcy law, affecting both business and consumer bankruptcies. This legislation, called the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), became effective on October 17, 2005. This note summarizes key provisions of the new law that affect business bankruptcy reorganization under Chapter 11 of the U.S. Bankruptcy Code, contrasting these provisions with corresponding provisions in the old law.

    Keywords: Government Legislation; Restructuring; Personal Finance; Laws and Statutes; Insolvency and Bankruptcy; Corporate Finance;

    Citation:

    Gilson, Stuart C. "Note on the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA)." Harvard Business School Background Note 209-133, March 2009. View Details
  18. Groupe Eurotunnel S.A. (B): Restructuring Under the Procedure de Sauvegarde

    In mid-2007 the chairman and CEO of Eurotunnel Group, having elected to file for bankruptcy under a newly-enacted French insolvency law, awaits the outcome of a vote by creditors and shareholders. At least 50% of the shareholders must approve the plan, however they face significant dilution of their ownership interests in Eurotunnel. If the vote fails to pass, the possibility that the company may have to be liquidated becomes increasingly likely.

    Keywords: Restructuring; Capital Structure; Insolvency and Bankruptcy; Law; Valuation; Assets; Investment Funds; Voting; Business and Shareholder Relations; Ownership; Outcome or Result; France;

    Citation:

    Gilson, Stuart C., Vincent Marie Dessain, and Sarah Abbott. "Groupe Eurotunnel S.A. (B): Restructuring Under the Procedure de Sauvegarde." Harvard Business School Supplement 209-113, March 2009. View Details
  19. Continental Airlines--1992 (Abridged)

    The CEO is preparing a recommendation to the board regarding several potential outside investments in the company, which is currently operating in bankruptcy. In making his decision, the CEO has to consider various financial and strategic factors, including possible synergy benefits and support for the company's huge planned expenditures on new aircraft. To assess the relative merits of the competing investment proposals, it is also necessary to value the company's assets and prescribe a new capital structure for the company after it leaves Chapter 11. Tax factors are extremely important in the analysis. The final decision must be acceptable to the company's creditors and be compatible with allowed U.S. bankruptcy practices.

    Keywords: Capital Structure; Cash Flow; Cost of Capital; Insolvency and Bankruptcy; Investment; Taxation; Risk and Uncertainty; Valuation; Aerospace Industry; United States;

    Citation:

    Gilson, Stuart C. "Continental Airlines--1992 (Abridged)." Harvard Business School Case 294-058, November 1993. (Revised April 2007.) View Details
  20. Flagstar Companies, Inc. (Abridged)

    A large restaurant chain undergoes a leveraged buyout and subsequent recapitalization. Financial and operating problems at the company force it to consider various restructuring options, including a prepackaged Chapter 11 exchange offer to its public bondholders. Two investment bankers hired by senior and junior creditors present competing company valuations to the bankruptcy court that differ by $700 million.

    Keywords: Leveraged Buyouts; Restructuring; Capital; Insolvency and Bankruptcy; Debt Securities; Competition; Valuation; Financial Services Industry; United States;

    Citation:

    Gilson, Stuart C. "Flagstar Companies, Inc. (Abridged)." Harvard Business School Case 206-076, December 2005. (Revised April 2007.) View Details
  21. E.I. du Pont de Nemours and Company: The Conoco Split-off (A)

    After taking 30% of its Conoco oil and gas subsidiary public in the largest domestic initial public offering (IPO) in U.S. history, management of E.I. du Pont de Nemours and Co. (DuPont) is considering divesting its remaining interest in Conoco. This goal is to be accomplished through a relatively uncommon transaction called a corporate "split-off," under which DuPont's shareholders will be given the option to exchange their shares in DuPont for shares in Conoco (but, in contrast to a more conventional "spin-off," they are not obligated to exchange their shares). Management's objective in restructuring is to move DuPont away from its traditional energy and chemical business toward the life sciences (agriculture, biotechnology, and pharmaceuticals).

    Keywords: Business Conglomerates; Business Subsidiaries; Restructuring; Non-Renewable Energy; Chemicals; Assets; Initial Public Offering; Business and Shareholder Relations; Diversification; Value; Chemical Industry; United States;

    Citation:

    Gilson, Stuart C., and Perry Fagan. "E.I. du Pont de Nemours and Company: The Conoco Split-off (A)." Harvard Business School Case 202-005, December 2001. (Revised July 2005.) View Details
  22. Arch Wireless, Inc.

    The largest wireless paging company in the United States has to restructure its debt in response to the collapse of its market. The restructuring faces formidable challenges. Valuing the company is extremely difficult because Arch's public competitors are also severely troubled and the industry's future is highly uncertain. In addition, the company has an extremely complicated parent-subsidiary holding company structure.

    Keywords: Restructuring; Borrowing and Debt; Insolvency and Bankruptcy; Organizational Structure; Valuation;

    Citation:

    Gilson, Stuart C., and Perry Fagan. "Arch Wireless, Inc." Harvard Business School Case 205-024, January 2005. (Revised January 2005.) View Details
  23. FAG Kugelfischer-A German Restructuring

    A large German manufacturer of ball bearings and precision machinery experiences severe financial difficulty brought on by poor management practices, an ill-conceived acquisition of a former East German ball-bearings company, and an industry recession. The company hires a German professional turnaround manager who in past turnarounds of German firms has engaged in "U.S.-style" corporate downsizing practices including massive layoffs and asset sales.

    Keywords: Accounting; Acquisition; Restructuring; Economic Slowdown and Stagnation; Machinery and Machining; Policy; Resignation and Termination; Management Practices and Processes; Performance Evaluation; Business and Shareholder Relations; Business and Stakeholder Relations; Europe; Germany; United States;

    Citation:

    Gilson, Stuart C. "FAG Kugelfischer-A German Restructuring." Harvard Business School Case 298-046, March 1998. (Revised November 2004.) View Details
  24. Finova Group, Inc. (A), The

    Finova Group, a $14 billion commercial finance company, filed for Chapter 11 in early March 2001, in what was one of the largest U.S. bankruptcy filings of all time and the largest corporate bond default since the Great Depression. While in Chapter 11, Finova became the object of a heated bidding contest. Under the final accepted plan of reorganization, "Berkadia" (partnership of Leucadia National Corp. and value-investor Warren Buffet's Bershire Hathaway) sponsored a massive recapitalization of Finova, providing a secured loan of $6 billion to buy out the unsecured bank and bond creditors. In return, Berkadia received 51% of the reorganized company's common stock and control of the board of directors. No development of new business was planned. A number of entities represented in the case, however, believed that the company might have substantial going concern value and were concerned that Berkadia would acquire the company at an artificially low price. During the bankruptcy, a large fraction of Finova's debt and equity claims were purchased by so-called "vulture investors," who hoped to influence the outcome of the case.

    Keywords: Acquisition; Business Startups; Borrowing and Debt; Equity; Insolvency and Bankruptcy; Debt Securities; Price; Crisis Management; Bids and Bidding; Partners and Partnerships; Strategy; Valuation; Financial Services Industry; United States;

    Citation:

    Gilson, Stuart C., and Perry Fagan. "Finova Group, Inc. (A), The." Harvard Business School Case 202-095, January 2002. (Revised January 2003.) View Details
  25. Seagate Technology Buyout

    In March 2000, a group of private investors and senior managers were negotiating a deal to acquire the disk drive operations of Seagate Technology. The motivating factor for the buyout was the apparently anomalous market value of Seagate's equity: Seagate's equity value was just a fraction of the value of its minority stake in Veritas Software Corp., a software maker. The investor group had to decide how much to offer for the operating assets, as well as how to finance the transaction. Further complicating the analysis was the fact that, unlike in traditional buyout settings, the target company was in a highly cyclical, volatile, and capital--intensive industry.

    Keywords: Valuation; Leveraged Buyouts; Financial Strategy; Computer Industry;

    Citation:

    Andrade, Gregor M., Stuart C. Gilson, and Todd C. Pulvino. "Seagate Technology Buyout." Harvard Business School Case 201-063, April 2001. (Revised March 2002.) View Details
  26. Loewen Group, Inc., The (Abridged)

    A publicly traded funeral home and cemetery consolidator faces imminent financial distress. The company has grown aggressively through the use of debt. Restructuring the debt is potentially very costly to creditors, shareholders, suppliers, and other corporate stakeholders. Cross-border and accounting issues could complicate the restructuring.

    Keywords: International Accounting; Restructuring; Borrowing and Debt; Capital Structure; Cost of Capital; Cross-Cultural and Cross-Border Issues; Crisis Management; Business and Shareholder Relations; Business and Stakeholder Relations; Service Industry;

    Citation:

    Gilson, Stuart C. "Loewen Group, Inc., The (Abridged)." Harvard Business School Case 201-082, January 2001. (Revised March 2002.) View Details
  27. Alphatec Electronics Pcl

    The newly appointed CEO of an important high-technology company in Thailand must lead the company through a complicated debt restructuring. Due to the collapse of the Thai currency, the company's debt burden, like that of most Thai companies, has skyrocketed because it has borrowed heavily in U.S. dollars. The CEO, who is a U.S. citizen, must restructure the company under the recently revised, and largely untested, new Thai bankruptcy law. The new law allows troubled companies to reorganize their businesses following an approach that is similar, but not identical, to that practiced in the United States under Chapter 11 of the Bankruptcy Code.

    Keywords: Currency Exchange Rate; Valuation; Management Teams; Restructuring; Laws and Statutes; Insolvency and Bankruptcy; Developing Countries and Economies; Borrowing and Debt; Technology Industry; Electronics Industry; Thailand; United States;

    Citation:

    Gilson, Stuart C., C. Fritz Foley, and Perry Fagan. "Alphatec Electronics Pcl." Harvard Business School Case 200-004, February 2000. (Revised March 2001.) View Details
  28. Valuing Companies in Corporate Restructurings: Technical Note

    This case provides a technical overview of different valuation techniques for use in valuing companies in corporate restructuring. Techniques covered include adjusted present value, WACC, capital cash flow, and discounted cash flow valuation. Specific numerical examples are provided.

    Keywords: Restructuring; Capital; Cash Flow; Interest Rates; Valuation;

    Citation:

    Gilson, Stuart C. "Valuing Companies in Corporate Restructurings: Technical Note." Harvard Business School Technical Note 201-073, December 2000. View Details
  29. Loewen Group Inc., The

    A publiclytraded funeral home and cemetery consolidator faces imminent financial distress. The company has aggressively grown through use of debt. Restructuring the debt is potentially very costly to creditors, shareholders, suppliers, and other corporate stakeholders. Cross-border and accounting issues potentially complicate the restructuring.

    Keywords: International Accounting; Restructuring; Capital Structure; Cost of Capital; Debt Securities; Cross-Cultural and Cross-Border Issues; Crisis Management; Business and Shareholder Relations; Business and Stakeholder Relations; Service Industry;

    Citation:

    Gilson, Stuart C., and Jose Camacho. "Loewen Group Inc., The." Harvard Business School Case 201-062, November 2000. (Revised December 2000.) View Details
  30. Flagstar Companies, Inc.

    A large restaurant chain undergoes a leveraged buyout and subsequent recapitalization. Financial and operating problems at the company force it to consider various restructuring options, including a "prepackaged" Chapter 11 exchange offer to its public bondholders. A rewritten version of two earlier cases.

    Keywords: Leveraged Buyouts; Restructuring; Capital; Insolvency and Bankruptcy; Debt Securities; Financial Services Industry; United States;

    Citation:

    Gilson, Stuart C., and Jeremy Cott. "Flagstar Companies, Inc." Harvard Business School Case 299-038, December 1998. (Revised May 1999.) View Details
  31. Chase Manhattan Corporation: The Making of America's Largest Bank

    Chase Bank and Chemical Bank intend to merge, producing the largest commercial bank in the United States, the fourth largest in the world. Projected financial benefits under the merger reflect significant planned reduction in operating costs, including 17,000 employee layoffs. Management also expects the merger to produce significant revenue increases as a result of increased economies of scale and scope, and other benefits of size and market leadership. The task of valuing the merger gains, negotiating an acceptable merger price, and implementing the post-merger restructuring is extremely complex.

    Keywords: Commercial Banking; Profit; Corporate Strategy; Value Creation; Restructuring; Negotiation; Mergers and Acquisitions; Risk and Uncertainty; Resignation and Termination; Revenue; Banking Industry; United States;

    Citation:

    Gilson, Stuart C., and Cedric Escalle. "Chase Manhattan Corporation: The Making of America's Largest Bank." Harvard Business School Case 298-016, July 1997. (Revised April 1998.) View Details
  32. Scott Paper Company

    A professional turnaround manager attempts to implement a massive global downsizing program at the world's largest producer of consumer tissue products. The plan involves laying off almost one third of the company's 34,000 hourly and salaried employees and dramatically changing the company's business focus through massive asset sales-all in less than a year.

    Keywords: Assets; Global Strategy; Resignation and Termination; Goals and Objectives; Business and Stakeholder Relations; Sales; Value Creation; Pulp and Paper Industry;

    Citation:

    Gilson, Stuart C., and Jeremy Cott. "Scott Paper Company." Harvard Business School Case 296-048, January 1996. (Revised September 1997.) View Details
  33. Transportation Displays, Incorporated (D): Exiting from a Successful Restructuring

    Following a successful corporate turnaround and, more recently, a leveraged recapitalization, management of a highly profitable, fast--growing outdoor advertising company must consider alternative ways to harvest cash flow from the company without jeopardizing the turnaround or incurring significant tax liabilities.

    Keywords: Restructuring; Capital; Cash Flow; Profit; Taxation; Private Ownership;

    Citation:

    Gilson, Stuart C., Vincent Hemmer, Eric Rahe, David Shorrock, and Stephen Voorhis. "Transportation Displays, Incorporated (D): Exiting from a Successful Restructuring." Harvard Business School Case 297-085, February 1997. View Details
  34. First Capital Holdings Corp.

    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: Risk Management; Debt Securities; Bonds; Valuation; Investment Return; Fair Value Accounting; Financial Institutions; Insurance Industry;

    Citation:

    Gilson, Stuart C., Harry DeAngelo, and Linda DeAngelo. "First Capital Holdings Corp." Harvard Business School Case 296-032, May 1996. View Details
  35. USX Corporation

    A large diversified steel and energy firm is pressured by a corporate raider to spin off its steel business in order to increase its stock price. As an alternative to the spinoff, management proposes replacing the company's common stock with two new classes of "targeted" stock that would represent separate claims against each business segment's cash flows, allowing the stock market to value each business separately (and more accurately).

    Keywords: Restructuring; Stocks; Valuation; Financial Institutions; Cash Flow;

    Citation:

    Gilson, Stuart C., and Jeremy Cott. "USX Corporation." Harvard Business School Case 296-050, February 1996. View Details
  36. Transportation Displays Incorporated (C): The Case for a Preemptive Restructuring

    A company nears the end of a long multiyear turnaround and now must consider how to "cash out" so its management can realize a financial return on investment. The privately held company has several options, including a leveraged ESOP and a leveraged recapitalization.

    Keywords: Business Exit or Shutdown; Capital; Employee Stock Ownership Plan; Private Ownership;

    Citation:

    Gilson, Stuart C., Joel T. Schwartz, Steve Silver, and David Stemerman. "Transportation Displays Incorporated (C): The Case for a Preemptive Restructuring." Harvard Business School Case 296-035, January 1996. View Details
  37. UAL Corporation

    In the largest attempted employee-buyout in history, a large U.S. commercial airline seeks substantial wage concessions from its employees in return for 53% stake in the airline's commmon stock and guaranteed seats on the board of directors. Management must convince employees, shareholders, Wall Street analysts, and the media that the buyout makes sense from value, operating, and strategic perspectives.

    Keywords: Restructuring; Corporate Governance; Labor; Wages; Management Teams; Employee Ownership; Business and Shareholder Relations; Strategy; Value; United States;

    Citation:

    Gilson, Stuart C., and Jeremy Cott. "UAL Corporation." Harvard Business School Case 295-130, March 1995. (Revised April 1995.) View Details
  38. Donald Salter Communications, Inc.

    A new CEO is hired to manage the turnaround of a family-owned newspaper publisher. In a departure from previous management, he implements a new compensation scheme that explicitly ties executive pay to market-value-based measures of firm performance. Because the company is not publicly traded, payoffs under the executive compensation plan are based on the firm's appraised value. Determining a value for this company (including any value created by the turnaround manager) is a complicated exercise. Additional complications arise because the firm's value also determines potential cash distributions to family members who wish to sell their shares back to the company. Certain family goals may also be inconsistent with the CEO's objective of maximizing the present value of the firm's assets.

    Keywords: Family Business; Transformation; Asset Management; Wages; Balanced Scorecard; Family Ownership; Motivation and Incentives; Valuation; Journalism and News Industry;

    Citation:

    Gilson, Stuart C., and Jeremy Cott. "Donald Salter Communications, Inc." Harvard Business School Case 295-114, March 1995. View Details
  39. Navistar International

    As a consequence of laying off half its workforce in a massive downsizing program, the company--a large manufacturer of medium and heavy trucks--struggles with a huge ($2.6 billion) liability for retiree medical costs. Although the company has promised its retirees (and their families) full lifetime medical coverage, it must negotiate a substantial reduction in these benefits to avoid bankruptcy.

    Keywords: Negotiation Process; Wages; Labor Unions; Legal Liability; Insolvency and Bankruptcy; Restructuring;

    Citation:

    Gilson, Stuart C., and Jeremy Cott. "Navistar International." Harvard Business School Case 295-030, November 1994. View Details
  40. Adjusted Present Value Method for Capital Assets, The

    This case provides an explanation of the adjusted present value method for valuing capital assets. The authors believe this approach is generally simple and better for the complicated and changing capital structure found in restructuring.

    Keywords: Value; Capital; Assets;

    Citation:

    Fenster, Steven R., and Stuart C. Gilson. "Adjusted Present Value Method for Capital Assets, The ." Harvard Business School Background Note 294-047, November 1993. (Revised July 1994.) View Details
  41. Humana, Inc.: Managing in a Changing Industry

    Intensifying competition and change in the U.S. health care industry force a large integrated health-care provider to reassess its strategy of operating both hospitals and health insurance plans (HMOs). In an attempt to increase its stock price and operating performance, the company considers a number of alternative restructuring strategies for separating the two businesses, including a corporate spinoff.

    Keywords: Business Strategy; Restructuring; Change Management; Financial Management; Health Industry;

    Citation:

    Gilson, Stuart C. "Humana, Inc.: Managing in a Changing Industry." Harvard Business School Case 294-062, March 1994. (Revised March 1994.) View Details
  42. National Convenience Stores, Inc.

    National Convenience Stores seeks to emerge from Chapter 11. Central to the nature of the reorganization plan is the company's determining enterprise value. The various constituencies (secured debt, unsecured debt, etc.) will seek to find an enterprise value that coincides with their interest. The case provides detailed projection data to permit full utilization of the relevant techniques.

    Keywords: Capital Structure; Valuation; Restructuring; Strategic Planning; Borrowing and Debt; Food and Beverage Industry; Texas;

    Citation:

    Fenster, Steven R., Stuart C. Gilson, and Roy Burstin. "National Convenience Stores, Inc." Harvard Business School Case 294-068, January 1994. View Details

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