Corporate Finance | Holger Spamann | August 12, 2013


Corporate Finance

by Holger Spamann Show/Hide
This playlist contains the judicial opinions that I assign in my Corporate Finance class. EDIT PLAYLIST INFORMATION DELETE PLAYLIST

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  1. 1 Show/Hide More VFB LLC. v. Campbell Soup Company
    Original Creator: Holger Spamann
    This case illustrates courts' reliance on public securities prices to answer difficult valuation questions. Here, the valuation question arises in the context of a fraudulent transfer claim.
  2. 2 Show/Hide More Bricklayers & Trowel Trades Intern. v. CSFB
    Original Creator: Holger Spamann
    This opinion first explains the basics of event studies, and their importance in securities litigation. The court then discusses problems with the particular study performed by plaintiffs' main expert witness. In this rare case, the court grants defendants' motion to exclude plaintiffs' expert testimony as misleading, which here further leads the court to grant summary judgment for the defendant sua sponte. For a different take on the analysis performed by the expert, see the plaintiffs' brief.
  3. 4 Show/Hide More In re Exide Technologies
    Original Creator: Holger Spamann

    To understand this case and the importance of valuation in bankruptcy, you need to know 11 U.S.C. 1129(a)(8)/(b)(1).

    This provision contains the key condition under which a judge can accept a bankruptcy plan without the consent of a class of impaired claimants. First, no junior claim can be paid unless all senior claims are paid in full (“absolute priority”). Second, however, senior claims cannot be paid more than in full. The only way to ensure both of these is to value the business and hence the equity of the reorganized business exactly. If it is valued too high, senior claims will get too little. If it is valued too low, junior claims will get too little.

    Not surprisingly, senior claimants always argue for a low valuation of the business, while junior claimants including shareholders argue for a high valuation

    A numerical example

    For example, imagine that the bankrupt company has $50 of senior debt and $50 of junior debt. For simplicity, consider an all-equity reorganization, i.e., a reorganization in which all of the claims to be allocated are equity (the reorganized company will not have any debt).

    If the judge values the business at $50, section 1129 requires that she allocate all the new equity to senior claimants and wipe out juniors and old equity. By contrast, if the judge values the business at $125, section 1129 requires that she allocate $50/$125=40% of the equity to each of the senior and junior groups, and the remaining 20% to the old shareholders.

  4. 5 Show/Hide More Kamin v. American Express Co.
    Original Creator: Holger Spamann
    hiding represents corporate finance version (law light)

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September 10, 2013

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