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Case Study of Loewen Group

Essay by   •  November 8, 2012  •  Essay  •  280 Words (2 Pages)  •  3,452 Views

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Executive Summary

The important finding that were gathered are listed below

* Debt financing is the fastest and comparitively cheapest method in financing a company

* Although excessive debt financing for grwoth has its drawbacks as seen in the following case.

* Filing for bankruptcy helps protect company by allowing it to restructure their debt, which is what we recommend in this case

Advantages of Debt financing

- Reduced tax liability.

Option 1: The first option they have is to start selling their assets to increase cash as to pay of the debt and prevent further defaults.. Although in my opinion this is just a temporary solution.

They might want to sell of assets in other countries and focus on one single country USA or Canada.

Option 2: The other option is to file for bankruptcy. This will allow the company to conduct regular business and think about their debt restructuring without interference of the debtors.

They could enjoy the advantages of the US laws such as the 'debtor-in-possession financing' or not having to pay interest on unsecured loans. Though this could worsen the situation.

The disadvantage of this is that they would also have to file in for bankruptcy in Canada as well where the laws are slightly stricter.

Recommendation: File for Chapter 11 bankruptcy

In my opinion it is better for Loewen group in its present condition to file for bankruptcy. It would protect them from its debtors and allow to restructure their debt.

I think the company is worth more than just by selling its individual assets . Altough this would result in Shareholders not getting anything.

This option allows the company to have a new financing structure, which could make it profitable again and be able to return the debt.



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