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At the close of the third quarter on September 2002, the chief executive officer (CEO) and chief financial officer (CFO) of Hexcel Corporation are considering a private equity offering of convertible preferred stock for $125 million. Since the economic downturn and the terrorist attacks in the United States on September 11, 2001, the company has seen a major downturn in the industries they service - Hexcel is a leader in the manufacturing of composite materials, reinforcements and structures for commercial aeronautics, defense and electronics. The difficult external environment has caused a drop of 16.4 per cent in year to date revenues and the company has had to renegotiate its bank covenant agreements. While the company has responded with a major restructuring effort to cut out $60 million in costs, the CEO and CFO need to find the cash to pay down $227 million in the next two years. With a leverage of 6.3 times of debt to EBITDA and a recent downgrading of their bonds to Caa, the company is heading towards a crisis in its financing. Hexcel''s management has considered several options such as more debt, an asset sale and three types of equity (primary offering, strategic investor and private equity). They have narrowed down the option to a private equity offering and need to evaluate the pricing and the overall appropriateness of the proposed deal. This case is designed for students to determine the values of securities in conditions of distress. Students will see the alternatives the management team has evaluated and specifically look at the details of the private equity offering.