Leveraged Buyout (LBO) of BCE.: Hedging Security Risk Case Solution

This Case is about RISK MANAGEMENT

PUBLICATION DATE: January 06, 2009 PRODUCT #: 908N23-HCB-ENG

In the year 2007, an analyst in the derivatives group of investment bank Grenfeld & Co. was requested to formulate a hedging strategy for Providence Equity Partners (Providence) in Bell Canada Enterprises (BCE Inc.). Providence was based in America and any strategy would entail substantial foreign exchange rate risk as a result of conversion of yields into U.S. dollars. The analyst needed to contemplate several long term hedging strategies that Grenfeld & Co. could urge to Providence. Her vice president had requested that she create a hedging strategy by initially assuming a 25 per cent IRR for the investment and its operation, based on two results at the end of the investment (investment horizon = five years): a zero per cent IRR and a 25 per cent IRR.

Leveraged Buyout (LBO) of BCE Hedging Security Risk Case Solution
Leveraged Buyout (LBO) of BCE.: Hedging Security Risk Case Solution
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