Hutchison Whampoa Limited: The Capital Structure Decision

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Hutchison Whampoa Limited: The Capital Structure Decision

After reading the case, you are expected to submit a preliminary case analysis report (progress report). In 5-4 Final Project: Milestone One: Progress Report, you will submit a progress report. The report should contain the identification and the analysis of the main issues/problems in the case. It should be 4–5 pages long and reflect a clear and deep understanding of the main issues. Spreadsheets for analysis should also be incorporated into the progress report.

Note that while these questions are helpful, your reports should not be written to answer these questions but to provide a full analysis of the case.

Suggested Questions

1. What kind of capital structure would you propose to Hutchison Whampoa in light of its future needs and why?

2. What bond rating do you think Hutchison Whampoa will be able to obtain from Standard and Poor’s?

3. What are the debt financing options? Why you are for/against the Yankee bond option?

4. Assume Hutchison Whampoa will require $1 million USD of financing in 1996. Assume that new equity can be raised at $48.8 a share and that a long-term debt issue will carry an interest cost of HIBOR plus 70 basis points (bps). How would an equity or debt issue impact Hutchison’s financial position and performance?