Marriott's Bondholders

Abstract:     
SUBJECT AREAS: Bonds, corporate restructuring, financial strategy, and expropriation of bondholder wealth.

CASE SETTING: 1992, USA, hotel company.

This case provides a platform for general discussion of corporate restructuring and the creation/destruction of value. The central issue is the transfer of wealth from bondholders to stockholders, and whether it is proper for a company to exploit bondholders in such a manner. The expropriation of bondholder wealth occurs because the creditworthiness of Host Marriott, where most of the debt will reside, is lower than the pre-restructured Marriott Corporation. The ability of Host Marriott to service the debt is a topic of interest, as are the information effects on bond and stock prices that accompany the announcement.

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Harvard Business School Publishing
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JEL Classification: G32, G34, L84

Case and Teaching Paper Series