Gaz de France

W. Carl  Kester

Case | HBS Case Collection | April 1988 (Revised May 1992)

Gaz de France

Abstract

The treasurer of Gaz de France is an aggressive, proactive manager of his company's liability structure, running one of the largest swap books of any non-financial corporation in the world. Currency futures, interbank forwards, and currency options are also frequently used to control the company's multi-currency liability structure. This case prompts students to explore the reasons and ramifications of such aggressive liability management, with particular attention being paid to the administrative challenges created by such a large swap position. An important decision has to be made regarding the management of the swap book in the face of the depreciating dollar, the decline of the franc against the German mark, and a possible realignment of the European Currency Unit. This is a comprehensive case involving swaps, debt policy, and foreign exchange exposure that is best taught after students have been introduced to these topics.

Keywords: Decisions; Borrowing and Debt; Currency Exchange Rate; Credit Derivatives and Swaps; Policy; Management; Organizational Structure; Energy Industry; Europe;

Format: Print

19 pages

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Citation:

Kester, W. Carl. "Gaz de France." Harvard Business School Case 288-030, April 1988. (Revised May 1992.)

In March 2013, Apple Computer has a very large cash balance, and is under pressure to return cash to shareholders. Hedge fund manager David Einhorn thinks Apple can "unlock value" by issuing perpetual preferred stock, dubbed iPrefs. Henry Blodget, CEO of Business Insider, disagrees, saying "you can't just wave your magic wand and make something of nothing." This short case is designed to support a discussion of "perfect" markets and the Modigliani-Miller capital structure irrelevance propositions. The case focuses on two questions: (1) From a shareholder's perspective, how is Apple's cash different from cash in a bank or money market account? (2) Can Apple create significant value for shareholders by splitting each common share into an iPref plus a common share?

Case | HBS Case Collection | January 2018 (Revised December 2018)

Capital Allocation at HCA

W. Carl Kester and Emily R. McComb

In early 2017, HCA Holdings, an investor-owned hospital management company, faced a strategically important capital allocation decision. After the exit of its private equity sponsors in 2016, HCA had to determine how best to allocate its substantial annual free cash flows among several competing alternatives. Equity analysts and some mutual fund investors were clamoring for the company to initiate regular quarterly dividends, while some other hedge fund investors were eager to see more share repurchases. Other choices being advocated by various parties included reducing leverage to improve HCA's credit rating to investment grade, spurring growth by initiating a major acquisition program or reinvesting heavily in existing markets to enhance HCA's strong competitive position. These choices had to be made in the face of uncertainty about the future of healthcare regulation and tax policy following the 2016 U.S. presidential election and in the context of its closest publicly traded peers struggling with heavy debt burdens. HCA's capital allocation choices would be crucial to its ability to provide high quality health care to patients, implement its corporate strategy, and deliver value to shareholders.

Keywords: capital allocation; cash distribution policy; dividends; Share Repurchases; growth strategy and execution; growth investing; Capital expenditures; debt management; Debt reduction; debt policy; hospital management; investor-owned hospital chains; Capital Budgeting; Capital Structure; Cash Flow; Corporate Finance; Decision Choices and Conditions; Health Industry; United States;

Citation:

Kester, W. Carl, and Emily R. McComb. "Capital Allocation at HCA." Harvard Business School Case 218-039, January 2018. (Revised December 2018.) View Details

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