Financial Distress

Ian H. sick/NYU hurt valuation-1 Prof. Ian Giddy New York University Distress Valuation Whats inquire worth? Whos winning? Whos losing? Ian H. Giddy/NYU Distress Valuation-2 right of first publication ©2003 Ian H. Giddy Corporate monetary Restructuring 3 When Default Threatens, nurture the Company Sale to Strategic Buyer Auction Merged Value Existing oversight New perplexity Voluntary Reorganization Ch 11 Reorganization Going occupy Value Voluntary Liquidation Ch 7 Liquidation Value Highest Valuation of Company? Copyright ©2003 Ian H. Giddy Corporate financial Restructuring 4 Example of Valuation: Zombie, Inc. Zombie, Inc lot Valuation Before After Shares 400,000 850,000 Book Value $ 10.00 $ 10.00 Acquisition Value $ 8.00 Management Est. $ 20.00 $ 9.41 NPV, based on EBITDA 1,100,000 1,100,000 WACC 17.48% 11.22% Growth 2.5% 2.5% Debt 10,100,000 5,600,000 Going Concern Value $ (6.43) $ 8.62 alternative value? Bank lenders Before After Debt (at market) 7,182,749 4,500,000 Equity (NPV value) 0 3,876,905 entire 7,182,749 8,376,905 Ian H. Giddy/NYU Distress Valuation-3 Copyright ©2003 Ian H. Giddy Corporate Financial Restructuring 6 Valuation in Distress Restructuring q Liquidation value q Acquisition price q endeavour value Copyright ©2003 Ian H.

Giddy Corporate Financial Restructuring 7 first step Valuation in Distress Restructuring q Multiples q FCFF discounted at WACC q APV q Capital Cash Flows q Option Value Ian H. Giddy/NYU Distress Valuation-4 Copyright ©2003 Ian H. Giddy Corporate Financial Restructuring 8 Multiples in Distress Allied Industries Multiples: Enterprise Value Industry (D+E)/EBIT 12.9 Allied EBIT 32 Allied est. Enterprise Value 412.8 Source: morningstar.com DDoo ththeessee mmaakkee sseennssee?? Copyright ©2003 Ian H. Giddy Corporate Financial Restructuring 9 Free Cash Flows to the Firm @ WACC Historical financial results Adjust for nonrecurring aspects Gauge future growth Adjust for... If you essential to get a full essay, order it on our website: Orderessay

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