Rockwood Specialities: High Yield Debt Issue
affiliation not provided to SSRN
University of Virginia - Darden School of Business
Darden Case No. UVA-F-1447
In November 2000, Kohlberg, Kravis, and Roberts (KKR) purchased Rockwood Specialties, Inc., a specialty chemicals company, in a $1.2 billion buyout. Spurred by the favorable market conditions in the first half of 2003, KKR was contemplating refinancing its buyout debt in June 2003. Merrill Lynch, its underwriter, proposed to refinance the earlier funding, in part, with a $375 million issue of senior subordinated notes. Although there had been a favorable interest-rate environment and a strong volume of debt issuance in the first half of 2003, the Rockwood offering still posed some significant challenges. First, it was a first-time issue by a privately held company. Second, KKR's motivation for the offering and the complex financial structure surrounding it had resulted in a preliminary credit rating of Caa from Moody's. Students are asked to evaluate and price the high-yield issue. The case discusses how credit ratings, market conditions, and organizational structure affect bond yields. There is a brief history of how the high-yield market evolved from the mid-1980s through 2003.
Number of Pages in PDF File: 24
Keywords: bonds, securities
Date posted: October 21, 2008
© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollobot1 in 0.266 seconds