Rockwood Specialities: High Yield Debt Issue

Kevin Kim

affiliation not provided to SSRN

Susan Chaplinsky

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

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Date posted: October 21, 2008  

Suggested Citation

Kim, Kevin and Chaplinsky, Susan, Rockwood Specialities: High Yield Debt Issue. Darden Case No. UVA-F-1447. Available at SSRN: http://ssrn.com/abstract=1279922

Contact Information

Kevin Kim
affiliation not provided to SSRN
No Address Available
Susan J. Chaplinsky (Contact Author)
University of Virginia - Darden School of Business ( email )
P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4810 (Phone)
434-243-7676 (Fax)
HOME PAGE: http://www.darden.virginia.edu/faculty/chaplinsky.htm
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