Subject category:
Finance, Accounting and Control
Published by:
Stanford Business School
Version: July 2006
Length: 4 pages
Data source: Published sources
Share a link:
https://casecent.re/p/6015
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Abstract
The Marriott case provides a springboard for general discussion of corporate restructuring and the creation/destruction of value. The central issue is the transfer of wealth from bondholders to stockholders, and whether it is proper for a company to exploit bondholders in such a manner. The expropriation of bondholder wealth occurs because the credit worthiness of Host Marriott, where most of the debt will reside, is lower than the pre-restructured Marriott Corporation. The ability of Host Marriott to service the debt also is a topic of interest, as are the information effects on bond and stock prices which accompany the announcement. The case invariably ends up with a discussion of what bondholders and management, in behalf of stockholders, should do.
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Abstract
The Marriott case provides a springboard for general discussion of corporate restructuring and the creation/destruction of value. The central issue is the transfer of wealth from bondholders to stockholders, and whether it is proper for a company to exploit bondholders in such a manner. The expropriation of bondholder wealth occurs because the credit worthiness of Host Marriott, where most of the debt will reside, is lower than the pre-restructured Marriott Corporation. The ability of Host Marriott to service the debt also is a topic of interest, as are the information effects on bond and stock prices which accompany the announcement. The case invariably ends up with a discussion of what bondholders and management, in behalf of stockholders, should do.