Any of the above approaches would have the effect of reducing or eliminating the number of reset bonds outstanding. While there had been court decisions against the tobacco companies, none of any significance stood on appeal. And this KKR accomplished with a professional staff of fewer than two dozen. Perold as the basis for class discussion rather that to illustrate either effective or ineffective handling of an administrative situation. The projections show there being ample cash available to make required debt repayments in and However, this was one of KKR’s least attractive alternatives, since its strategy was to develop rather than liquidate RJR’s major food businesses. If the conversion occurs, the bondholders forego the right to the interest accrued on the debentures.
In the spring of , RJR was in compliance with all such covenants and no violation of same appeared imminent. The rate must be in the range of RJR Nabisco – Exhibit 5 Consolidated Operating, Cash Flow, and Balance Sheet Projections, dollars in millions- continued A A 1, 43 A 1, 1, 3, 4, E 1, 1, 4, 2, 1, P 1, P 2, P 64 2, C: However, this was one of KKR’s least attractive alternatives, since its strategy was to develop rather than liquidate RJR’s major food businesses. Already there was a complete ban on smoking on domestic flights, and numerous state laws were restricting smoking in the work place. Cash Flow Net Income Add back: Fees charged on other large deals as a percentage of the total transaction in parentheses were:
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Moody’s also down-graded RJR’s other debt, a move that triggered substantial declines in the market prices of RJR’s securities. Callable at par at any time. With respect to the latter, covenants effectively prevented any course of action other than the raising of external funds to retire the loan.
The reset bonds came into being as the “cram-down” securities in the RJR buyout. In the spring ofRJR was in compliance with all such covenants and no violation of same appeared imminent. Partnership Debt Securities due The rate must be in the range of Indentures required that on or before April 28,RJR reset the rate so that the bonds would trade at par see Exhibit 1.
How many of the reset bonds would have to be repurchased was not obvious.
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Kravis, and George R. If the conversion occurs, the bondholders forego the right to the interest accrued on the debentures.
Any of the above approaches would have the effect of reducing or eliminating the number of reset bonds outstanding. Subordinated Floating Rate Notes due Failing such a reset, the bonds would become due and payable almost immediately.
However, this was one of KKR’s least attractive alternatives, since its strategy was to develop rather than liquidate RJR’s major food businesses.
Capital expenditures Increase in working capitalg Plus: Callable in at Exhibit 5 also gives a cash flow analysis based naibsco the above projected operating results. An often mentioned source of money was KKR’s LBO fund, which still had several billion dollars available for investments described more fully below.
Exhibit 5 gives projections of RJR Nabisco’s operating results for the years — LIBOR plus basis points. Already there was a complete ban on smoking on domestic flights, and numerous state laws ejr restricting smoking in the work place.
The December 31, balance sheet, revised in the April 5, KKR proxy statement to stockholders to show the projected result of the leveraged buyout. At the time, the company was embroiled in numerous asbestos-related product liability lawsuits stemming from the manufacture of asbestos building materials by the company’s Celotex Corporation subsidiary.
The state district court judge in Texas agreed with plaintiffs’ contention that the LBO was a fraudulent scheme designed to shield the company from asbestos litigation. Plaintiffs’ arguments, by and large, fell into two general camps: In other words, conditions of oversupply and not necessarily poor fundamentals could have been causing the depressed prices of the reset bonds. Tobacco revenue was projected to grow at 8.
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To participants ejr its funds, KKR charged 1. The raison d’etre of the Bank Credit Agreement was primarily to ensure that the banks were paid off ahead of anybody else; exceptions to this principle were few. The projections show there being ample cash available to make required debt repayments in and After the equity of Holdings, the most junior securities were the Senior Converting Debentures followed by cxse Exchange Debentures. Analysts thought RJR would be within this 1: First maturity inbut can be extended each year for one year up to final maturity in All three had left Bear Stearns where they had been doing “bootstrap” as in “pull yourself up by your bootstraps” financings, the name given stduy leveraged buyouts back then.