This Case is about FINANCIAL MANAGEMENT, FINANCIAL MARKETS, MARKETING, REORGANIZATION
PUBLICATION DATE: October 11, 2013 PRODUCT #: 214037-HCB-ENG
The credit boom that preceded the 2007-2009 fiscal catastrophe led to several financing practices that exposed banks to substantial threats. Specifically, when fiscal enigma untangled, there were a number of billion dollars’ worth of leveraged buyout (LBO) loans that were supposed to be syndicated however, due to full underwriting, needed to be funded by the instigative banks.
The case scenario character is Bennett J. Goodman, a higher-ranking Managing Director at Blackstone. The chance to purchase a portion of the leveraged loan portfolio being offered on the market by Citigroup is evaluated by Goodman. This case may be utilized as a vehicle for discussing details of leveraged funding. In particular, it illustrates the close link between syndicated-financing-backed loan securitization and leveraged trades, and offers a context for discussion of factors that caused the leveraged credit boom that finished in 2007.
The instance also provides in depth details of the construction of its underlying assets and the trade, and functions as a means for valuing and understanding alternate investment strategies pursued during the credit market disaster by private equity firms. As a byproduct, pupils find out the best way to utilize credit default swaps (CDS), a market-based index, for valuation.
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