Times Mirror Co. PEPS Proposal Review Case Solution
This Case is about POLICY, RISK MANAGEMENT
PUBLICATION DATE: April 19, 1996
Times Mirror Co. (TMC) possesses a large block of common stock of Netscape which was bought before its IPO, on which it’s significant unrealized increases. TMC is restricted from selling the stock in a public offering and is thus considering a suggestion by Morgan Stanley to issue for the monetization of PEPS holdings. These PEPS be redeemable in five years at a cost subject to specific formulas and call provisions efficiently allocating the benefit in the company’s stock among TMC as well as the PEPS investors and would pay interest quarterly. The tax treatment of the PEPS, while uncertain, is of critical value.
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