Financing MG Rover Through Bankruptcy: Some Risk Financing Lessons
Tóm tắt
The current study delves into the post-loss financing options MG Rover (MGR) could have used, in addition to the UK government bridging loan, before its collapse in 2005. An examination of the pre-bankruptcy state of MGR was carried out, and it confirms the existence of high security holder agency costs arising from debt overhang and adverse selection problems. In addition, the findings show that due to steep private information costs and negative trend in earnings, the use of equity, debt, government loans and contingent financing as post-loss funding vehicles was not an optimal financial decision in markets where capital is rationed. In this case, the existence of both trade debt and legacy costs made it difficult for potential investors to assess the full value of MGR's assets, before debt retirement. Issuing low priced risky securities would have imposed a net loss on existing securities and made them unattractive to investors. A conclusion reached is that the only way of addressing post-loss risk financing problems at MGR was either through issuing securities whose value was least sensitive to revelation of ultimate information or through bankruptcy which is what they rightly did.
Tài liệu tham khảo
Culp, C. (2001). The Risk Management Process: Business Strategy and Tactics. New York: John Wiley & Sons Inc., Wiley Finance.
Culp, C. (2002). The ART of Risk Management: Alternative Risk Transfer, Capital Structure and the Convergence of Insurance and Capital Markets. New York: John Wiley & Sons Inc, Wiley Finance.
Cummins, J.D ., Phillips, R.D. and Allen, F. (1998). Financial Pricing of Insurance for Multiple – Line Insurance Company. Journal of Risk and Insurance, 65, pp. 597–636.
Doherty, N.A. (2000). Integrated Risk Management: Techniques and Strategies for Reducing Risk. New York: McGraw-Hill.
Harris, M., and Raviv, A. (1990). Capital Structure and the Informal Role of Debt. Journal of Finance 45, pp. 321–349.
Holweg, M. and Oliver, N. (2005). Who Killed MG Rover?. A Special Report from the Cambridge-MIT Institute's Centre for Competitiveness and Innovation, University of Cambridge.
Merton, R.C. (1974). On the Pricing of Corporate Debt: The Risk Structure of Interest Rate. Journal of Finance 29, pp. 449–470.
Myers, S.C. (1984). The Capital Structure Puzzle. Journal of Finance 39, pp. 575–592.
Myers, S.C. and Majluf, N.S. (1984). Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have. Journal of Financial Economics 13, pp. 187–222.
Autoindustry online (2006). http://www.autoindustry.co.uk/statistics/production/Top%20Manufacturers.
BBC News Online (3 April 2005). http://news.bbc.co.uk/1/hi/business/4404355.stm.
BBC News Online (4 April 2005). http://news.bbc.co.uk/1/hi/business/4410459.stm.
BBC News Online (7 April 2005). http://news.bbc.co.uk/1/hi/uk_politics/4294709.stm.
BBC News Online (7 April 2005). http://news.bbc.co.uk/1/hi/business/4422741.stm.
BBC News Online (7 April 2005). http://news.bbc.co.uk/1/hi/business/4422705.stm.
BBC News Online (7 April 2005). http://news.bbc.co.uk/1/hi/business/4420507.stm.
BBC News Online (9 April 2005). http://news.bbc.co.uk/1/hi/business/4426383.stm.
BBC News Online (10 April 2005). http://news.bbc.co.uk/1/hi/uk_politics/vote_2005/frontpage/4429663.stm.
BBC News Online (12 April 2005). http://news.bbc.co.uk/1/hi/business/4413403.stm.
BBC News Online (12 April 2005). http://news.bbc.co.uk/1/hi/business/4434377.stm.
BBC News Online (15 April 2005). http://news.bbc.co.uk/1/hi/business/4408645.stm.
Business Week Online (20 April 2005). http://www.businessweek.com/bwdaily/dnflash/apr2005/nf20050420_1791_db016.htm.
BBC News Online (27 April 2005). http://news.bbc.co.uk/1/hi/business/4488899.stm.
BBC News Online (2 May 2005). http://news.bbc.co.uk/1/hi/business/4505899.stm.
BBC News Online (27 May 2005). http://news.bbc.co.uk/1/hi/business/4585351.stm.
BBC News Online (23 July 2005). http://news.bbc.co.uk/1/hi/business/4708739.stm.
BBC News Online (27 December 2005). http://news.bbc.co.uk/1/hi/business/4544622.stm.
BBC News Online (17 January 2006). http://news.bbc.co.uk/1/hi/business/4622180.stm.
BBC News Online (22 February 2006). http://news.bbc.co.uk/1/hi/business/4739616.stm.