Sealed Air Corporations Leveraged Recapitalization (A)

Each group should write down the answers to the following questions and hand them
in at the beginning of the class on March 1.

Why did Sealed Air undertake a leveraged recap?

How much value was created?

If you were a shareholder. What would you want Dermont Dunphy to do with the
money?

How did Sealed Air end up with a negative net worth? How much was the
negative worth?

The following questions also are study material for the examinations. You do not
need to answer them in your group-homework due on February 11.

Why did Dermot Dunphy, the CEO, feel that it was necessary to change the
companys priorities and incentive structure following the recap?

Why did Sealed Airs investor base turnover completely after the recap?

Why did managers at Sealed Air experience a renewed interest in manufacturing?

Why had Sealed Air been able to manufacture inefficiently and still have high
margins?

Do you think that the leveraged recap was a good idea? Explain

Did the recap created value? Where did the value created came from?

Is the WCM plan inconsistent with levering up?

What are the implications for the firm of the investor base turnover?

Was the constraint imposed on capital expenditures under the bank lending
agreement good or bad for the company? Do you think managers will be able to
successfully renegotiate this covenant?

Do you think that such an increase in leverage be good for all companies? Why
or why not?

Why did the company lever up instead of paying out todays cash and see if
anything crops up tomorrow?

What would be the position of the following stakeholder:

Senior banker

Subordinated lender

Institutional investor

Investment banker

Competitor

What do you think about Sealed Airs recap? Would you be concerned that
managers are receiving a big dividend checks? Why?