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Corning Case

In: Business and Management

Submitted By mfisher070
Words 320
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1) Describe Corning’s business. How has the firm performed? What accounts for the changes in valuation in Corning stock in Exhibit 2. * Competes in three operating segments: * Telecommunications (63% of Sales) * Advanced Materials * Information Display * Firm performed well until 2000 when the tech bubble burst. * Stock price dropped due to falling demand for fiber optics, cable systems, and other high-tech equipment the company produced. * US Telecom Index peaked at over 1,300 in December 1999, fell to 630 in December 2001. 2) Why does Corning need to raise capital? How has the firm raised capital in the past? Why might it be difficult or undesirable to raise equity now? Debt now? * Need to raise capital to invest in future growth and to preserve the balance sheet: * $2 Billion revolving credit line requiring maintaining a Debt to Capitalization ratio of 60% or less. * Previously used conventional methods: issuing bonds, common stock, commercial paper etc. * Why not equity: Stock price is extremely low currently due to tech bubble so corning would not receive a large amount of cash. * Issuing equity would further depress stock price * Why not debt: Recently downgraded to junk, so any debt issued would be very expensive. Also, issuing debt would increase debt/capital ratio, which could result in the line of credit being lost.
3) What is the theoretical value of the Corning mandatory preferred convertible described in Exhibit 10?
4) Is the proposed structure and pricing fair a fair deal for investors? Is it a good deal for Corning?
5) Why is JP Morgan proposing this particular security? What factors will determine whether Corning proceeds with offering? Does it address Corning’s financial problems? * CPS would help corning gain access to the capital it needs without issuing debt or...

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