'Marriot Corporation Essay\r'

'2. Is the proposed restructuring consistent with contractsing’s indebtedness? 3. The case describes two fancys of tutors’ fiducial duty (p. 9). Which do you favor: the sh arholder conception or the corporate conception? Does your stance lead a difference in this case? 4. Should Mr. Marriott recommend the proposed restructuring to the jump on? Marriott Corporation (A)\r\n1. Why is Marriott’s forefront financial officer proposing cast carry? What is your assessment of MC’s financial condition? Is this examine necessary for the beau monde’s survival?. 2. Is witness carry consistent with management’s responsibilities? To bondholders? To shareholders? To the earth? 3. The case describes two conceptions of manager’s fiducial duty. Which do you favor: the shareholder conception or the corporate conception? Does your stance make a difference in this case? 4. Should Mr. Marriott recommend the proposed restructuring to the boar d? 5. Who will be affected by Project carry? Should MC make any concessions to the bondholders?\r\nâ€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€â€\r\nAns. 1\r\nProject Chariot involves a conflict of busy between the shareholders and the bondholders since in this case the debt organism held by Marriott Corporation (MC) is risky. Project Chariot aims to create MII with pocket-size debt and HMC with high debt. Thus bondholders will find that their enthronement gets tied to risky current state assets whose compass is uncertain. Food management which is a major atom of MC remains with MII. Thus Project Chariot aims to give shareholders the business upside and bondholders the hearty- realm downside. Hence this appears to be a case of risk shifting. Shareholders stand to net income enchantment bondholder s will lose if Project Chariot is implemented.\r\nAns. 2\r\nThis seems to be a case of ‘Cashing come in’/’Wealth Transfer’ where the ‘over both’ wealth is being impartred from the bond holders to the equity holders. The following points lead us to the direction of it being a ‘wealth transfer’ type of conflict: * Chariot will offspring in a loss to bondholders and a compass to shareholders as the bonds will be downgraded by grade agencies and the returns of the bondholders will be attached to a heavy indebted duty * Total Debt will drive more risky, and bonds will be downgraded to ‘below enthronisation grade’ level\r\n* MC would be revision integrity into two separate companies. MII would do MC’s lodging, food, and facilities management businesses, whereas HMC would retain MC’s real estate holdings and its concessions on toll roads and in airports, Hence bond holders will at a magazine be pos sessed of a claim on only the payoffs of HMC and not MII. So, because of the above reasons ‘Project Chariot’ seems like a case of ‘Wealth Transfer’ conflict of interest.\r\nAns. 3\r\nWe believe in the broad view of manager responsibility. We think that managers should not only consider the interests of shareholders alone also the interests of bondholders, employees, and different related parties. This responsibility is sluice more important in the case of a B2C smart set like Marriott. If they get…\r\n1. If the Project Chariot is implemented i.e. Marriott is divided into 2 companies Marriott International(MI) with the risk expel profit generating operating hotel and advantage business while the other entertain Marriott(HM) a would own Marriott’s hotel and undeveloped real estate businesses and other non service businesses, this will affect the following players:\r\na) Shareholders:\r\nShareholder now brook majority stake in a corporati on with a lower probability of failure while all the risk is transferred to debt holders. So all the risky coronations are highly leveraged with bond holders overt to the risk. On the other hand MI okay mainly by shareholders equity and performing assets and frankincense would be able to issue new debt change magnitude apprize for both shareholders and the corporation. Thus the shareholders would gain at the expense of bond holders and the equity value of the community would increase.\r\nb) Bondholders\r\nBondholders had a circuit to lose as fit in to Project Chariot almost all the debt would be assigned to HM. Given the problems in real estate and hotel markets there was a concern of HM’s ability to meet its debt payment and there was a high probability of default. This meant that the risk was issued at investing grade but now was not back by valuable assets of the companies which were to be spun off to MI which was to be backed by equity. The value of the bonds wou ld adjust substantially and the bond holders would loose a lot of their enthronisation.\r\nc) Management(The Mariott brothers)\r\nThe management gains from the spin off since it is able to sever its discommodeed assets from the profit driving assets and there was a new company which was not under distress then helping them retain their management positions and beginning from scratch. They can concentrate on core businesses thus improving efficiency and value. d) The value of the whole company:\r\nThe spin off does not create value for the company as a whole but only distributes the…\r\nWhat: Under Project Chariot, Marriott Corporation (MC) would find two separate companies. The new company, Marriott International co-ordinated (MII), would consist of MC’s lodging, food, and facilities management businesses, as well as the management of its life-care facilities. The existing company, renamed Host Marriott Corporation (HMC), would retain all MC’s real estate holdings and its concessions on toll roads and airports. Why: This project is being proposed because the economic stave in the late 1980s and the 1990 real estate market crash left MC owning many an(prenominal) saucily developed properties for which there were no buyers, unitedly with a massive burden of debt. The new company (MII) would have the financial strength to raise seat of government in order to take advantage of investment opportunities. The existing company (HMC) would take on the newly developed properties and most of the existing debt.\r\nHMC would be cherished for the chance of appreciation in the property holdings when the real estate market recovered, not on the posterior of earnings, thereby reducing the pressure to sell properties at depressed prices. 2- The fiduciary duty of management is to the shareholders because they are more than creditors; they are the actual owners of the firm. Management is entrusted with the responsibility to increase shareholder v alue and their main focus should be on investing in projects that discover that task. As stated in the case: â€Å"U.S. courts had held that corporations have no responsibilities to safeguard the interests of bondholders other than those spelled out by the terms of the bond indenture”.\r\n3- I first looked at the initial market reaction; the change resulting from October 2, 1992 (pre-announcement) through October 7, 1992 (post-announcement). I used October 7 for my initial market reaction because in 1992 many pile may have still relied on newspapers for investment information. In addition, I assessed this narrow amount of time separately because widening the operate of dates used to quantify the change in prices may allow other variables outside of Project Chariot to come into play. However, I also looked at a wider range of time [October 2, 1992 (pre-announcement) through December 31, 1992]. If you can reasonably get no extraneous variables affected the prices during this time, widening the range of dates assessed can give an idea of the impact to prices afterwards the initial market over/under-re…\r\n'