Parkhomenko A.V., Grigoriadi E.E., Martynova N.V., Neuimin K.V.Moscow, Russia 11/25/2006. Rosario Acero S.A. Case Study in Corporate Finance-II: Managing Capital Structure Report on Rosario Acero S.A.: Managing Capital Structure Parkhomenko A.V., Grigoriadi E.E., Martynova N.V., Neuimin K.V. Rosario Acero S.A. Case Study in Corporate Finance-II: Managing Capital Structure 1 Martynova N.61% Notes Growth rate shows a long-term world economy growth pattern.00 IPO 10.. CSA. Case Study in Corporate Finance-II: Managing Capital Structure Preface Rosario Acero S. Beta is taken is average from peer companies: AD. Russia 11/25/2006. Neuimin K. Equity Risk Premium – 5.A.00% Risk Free Rate 6.A. IPO vs. Rosario Acero S.V.00 % Risk free rate – UST 10 5 years Moving Average (4:1992-4:1996) CRP – is the difference between current YTM (March 1996) Argentina T-notes 10 years and Current YTM UST 10 Valuing IPO and Debt issue 30. In order to answer the question we will perfume Rosario valuation (see Appendix 1-2 for details) under different financing scenario using the following assumptions Valuation assumption Growth rate 3.00 15.00 20. is considering IPO and hybrid-debt issue in order to pay the principal for the credit line and refinance part of their long-term debt. Moscow.00% Beta unleveraged 0. Other two companies are considered as non-comparable (non-comps).E. GA.V.00 Debt 5.00 Firm Equity FCFF Equity FCFE Rosario Acero S. Debt At the first stage we need to find out whether IPO or debt financing is the best financing policy for Rosario shareholders.55% CRP 1. Grigoriadi E.A. In this paper we would quest for the answers for two main issues: the first one is associated with the IPO-debt choice. Given the solution for the first issues we will define an optimum debt-to-equity ratio.93 Equity Risk Premium 5. Case Study in Corporate Finance-II: Managing Capital Structure 2 .V.Parkhomenko A..00 25.. Grigoriadi E.00% 10. However. We would use three main approaches: WACC. Case Study in Corporate Finance-II: Managing Capital Structure 3 . Rosario Acero S.A. 1999.00% 8. 2001). Our analysis shows that the optimum D/E equals 50% with 11..00% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 0. Martynova N. there’s a subtle issue concerning value distribution among existing and new shareholders: IPO Optimal Debt ratio Choice In this section we would find optimum debt-to-equity ration for Rosario given their IPO choice. Case Study in Corporate Finance-II: Managing Capital Structure Our analysis suggests that company value is almost invariant to the financing decision.A. But 40% D/E gives almost the same WACC equal to 11.V. While if we look at the shareholder value we will find out that debt financing means much lower shareholder value.47% WACC (current – 11. Given that.00% 4.00% 6.. (See Appendix 3) Weighted A verage Cost of Capital Rosario. IPO is more preferable for shareholders. Moscow. WACC Using Damodaran’s rating based on EBIT/Interest coverage we estimate WACC for different D/E levels. Rosario Acero S.86% D/E level may be found suboptimum due to existence of recapitalization costs (Fisher. However.00% This numbers suggest to take 40% D/E as optimum (50% D/E means more risk in comparison with the benefits of smaller WACC).00% 2.V. Goldstein.00% 12. in practice the current 35.Parkhomenko A. This implies redistribution of company value from shareholders to creditors..82%). APV and Operation Income approaches.67%. Neuimin K.V. Russia 11/25/2006. Damodaran Rating WACC 14.E. 00 4 .A.50% 10. Our analysis strongly suggests that company should take no more than 40% of D/E.10% WACC 11.06 1.27 Cost of Equity = 14.00 15..14% D/E Ratio 55.03% 0.V.73 Market Price/share (C) = 16.33 28.47% -0. Martynova N. Neuimin K.00 5.16% AT Interest Rate on Debt = 6..44 17. Case Study in Corporate Finance-II: Managing Capital Structure 95% 90% 85% 80% 75% 70% 65% 60% 55% 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 0.00 Rosario Acero S.33 29.55% 15.55 0.V.82% 11.V.77 Market Price/share (G) = 16.28 1. APV Rosario.35% Market Value of Firm (C) = 27.91% 1.00 20.16 0.36% AT Interest Rate on Debt = 10. = Adjusted Present Value In estimating APV we used probabilities from Damodaran. Russia 11/25/2006.06 1.86% 50.Parkhomenko A.00% 44.. see Appendix 4). Damodaran Rating APV 30.09% 1. Grigoriadi E. Case Study in Corporate Finance-II: Managing Capital Structure RESULTS FROM ANALYSIS Current Optimal Change D/(D+E) Ratio = 35.82 Market Value of Firm (G) = 27.22 0.00 10.44 18.91% 100. Rosario Acero S.00 25. Moscow.62 Beta for the Stock unlev.93% 7.A.66% 0.E.00% 14. because more debt leads to company inability to pay interest (EBIT/ Interest <1. Deviation of EBIT St.00% 50..34 66..Deviation of EBIT.E.00% 30.00% 10. P r opability of default Propability of default Rosario 1/3 deviation 100. % 19962002 4.72% we get the probability distribution shown in the following figure.72% 0. Russia 11/25/2006. Neuimin K.. Operation Income Approach In this approach we used the following assumptions.V. because the difference in value is not significant. than data taken from past.(See Appendix 5) Average EBIT St.86% (current level) or 40% D/E.22% Using standard deviation of EBIT equal 20.A.34% EBIT standard deviation in order to asses the senility of the analysis. We also compute probability distribution for 33.A.00% 60.51 0.89 20.00% 80.00% 90.29 0. Grigoriadi E.Parkhomenko A. Martynova N. Case Study in Corporate Finance-II: Managing Capital Structure 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 0.00% 20.00% Rosario Acero S. We believe that they give a much more precise estimates of future operating income. Case Study in Corporate Finance-II: Managing Capital Structure Analysis show that company show take 35. estimated on 19962002 data. % Average Interest St.V.00% 5 .Deviation of Interest.00% 40. Moscow.00% 70.V.Deviation of Interest St. Rosario Acero S. 35% D/E ratio is leading to a much moderate probability of default – 15.Parkhomenko A.21% and 20. Russia 11/25/2006. Moscow.34% standard deviation).A.. Neuimin K.72% and 33.A.V. Case Study in Corporate Finance-II: Managing Capital Structure It follows from the graph that 40% D/E ratio is associated with 33% and 36% probability of default (20. Grigoriadi E. Conclusion Based on the analysis of the three methods we think that first of all IPO is more preferable than debt financing scenario. Case Study in Corporate Finance-II: Managing Capital Structure 6 . Martynova N.V. And after the IPO is done there’s no evidence that capital structure is deviating heavily from the optimum 40%.V..94%.. Rosario Acero S. Rosario Acero S.E. The final choice is to be made after analysis of all benefits and costs. 72 3.94) (33.76 EPS (in dollars) 7.53 Price of Equity 16.00 0.53 1. Case Study in Corporate Finance-II: Managing Capital Structure 7 ..10 5.99) (5.52 2.00 0.44 Rosario Acero S.45 3.15) 3. Item 1.09 2.70) (7.94) (1.77 3.81) (1.44 2.68 (0.11 1.72) (1.70 51.19 3.10) (0. Moscow.3% Firm Value 26.09) (1.07) EBIT Interst (old loans) (1. Rosario Acero S.14 1.07) (6.21 1.00 0.00 0.00 EBT 2.75) (0.18) (44.00 0.V.80 38.65) (29.22 3. which is nominated in dollars FCFF Projected 1997 1998 1999 2000 2001 2002 2003 FCFF 1.09 1.90 26.88) Selling.48 Note.83) (0.23) Interest (new loan @ 13%) 0.00 0.14 19.03 1.13 2.55) (2.48 3.34 1.67 COGS (27.01) (1.V.77 3.57 Equity Value 17.09) (2.39) (8.60) (0.50) (6.93 22.57 Taxes 0.51 56. & admin.31) (2.50) (0.63 5.A.E.81 62.32) (48.43) (40.45) (1.39) (0.34 46.21 3.60 % of TV in overall value 81.38 1. Neuimin K.37) (0.72 (1.. Grigoriadi E.64 (0.37 30.96) (4.01 1.55 17.68 EAT with extraord. gen.72 EBIT(1-T) 2.21 Discounted TV 21.14 34.02) (36.68) 1.V.00 CapEx Amortization Changes in NWC WACC 11.Parkhomenko A. Russia 11/25/2006.82 4.68 1.00 (0.26 4.26 1. Martynova N.83 2.19 1.90) (2.20 4. All the figures are in millions of dollars.81 3.00% Terminal Value (2003) 42.38 42.A.82% growth rate 3. (3. Case Study in Corporate Finance-II: Managing Capital Structure Appendix 1 IPO Valuation Actual 1996 Projected 1997 1998 1999 2000 2001 2002 Income Statement Revenues 34.06 3.87 5.70 4.26) (1.37 3.89) EAT 2.11) 0.66) (1.68) (0.28 2. except EPS.91) (1.. 54) (0.73) (0.39) (0.09 92..81) (1.26% Equity Value 15..21 3.V.68 1.27 Price of Equity 15.38 1.V. Martynova N.55% growth rate 3.26 1.68 1.83 Discounted TV % of TV in overall value 14.11) 0.68) 1.39) (0.00 Changes in Loans (0.07 0.46 0.66) (0.0 Rosario Acero S.86% Ke 14.63 3. Moscow.E.44 2.A.Parkhomenko A. Rosario Acero S.03 1..55) (2.19 0.09) (2.90) (2.68 Changes in NWC (0.V.A.36 0.80) Θ (Debt to Capital) 35.00% Terminal Value (2002) 31.68 3.31) (2.01) (1.83 2. Grigoriadi E.75) (0.81 3.31 0.91) (1.53 1.14 1. Russia 11/25/2006. Neuimin K.83) (0. Case Study in Corporate Finance-II: Managing Capital Structure FCFE Projected FCFE EAT CapEx Amortization 1997 1998 1999 2000 2001 2002 2003 0.59) (0. Case Study in Corporate Finance-II: Managing Capital Structure 8 .72) (1.13 2.68 (1. All the figures are in millions of dollars.28 1.34 46.72 1.70 10.88) (1.75 2.98) (0.84 % of TV in overall value 75.51 2.90) (2.32) (48.55 4.00 (0.28 12.57 3.70) 0.33% growth rate 3.07) (6.V.52) (0.80 38..23) (1.01 1.96 6.18) (44.81 62.58 1.9% Firm Value 26.04) (1.72) (0.98) (0.42 1. Martynova N.72 (1.89 3. (3.59) (0.38 1.51 56.15) 3.03 1.37 3. gen.68) 1.64 EBIT Interst (on notes and old loans) (1.19 3.70) (7.10) Interest (new loan @ 13%) (0.31) (2.47) (0.96) (4.55 1.65) (29.81 EAT with extraord. Grigoriadi E.45 3.41 1.72) (1. Moscow.70) (0.04 7.20 4.99) (5.03 2.39) (8. Case Study in Corporate Finance-II: Managing Capital Structure 9 .28 2.51) (0.00 0.98) (0.09 1.63 4.06 FCFF Actual 1996 Projected 1997 1998 1999 2000 2001 2002 2003 FCFF 1. Rosario Acero S.A.40 2.11 5.A.97 0. which is nominated in dollars 8..45) EAT 2.V. Neuimin K.46 Rosario Acero S.68 (0.14 1.72 3.94) (33.99 51.76 EPS (in dollars) 7.59) (0.73) (0. Case Study in Corporate Finance-II: Managing Capital Structure Appendix 2 Debt Financing Scenario Valuation The Privately-Placed Debt-and-Warrants Issue Actual Projected 1996 1997 1998 1999 2000 2001 2002 Income Statement 34.01) (0.V.15 1.00% Terminal Value (2003) 39.00 1.E.81 4.26 Taxes 0.70 2.09) (2.94 CapEx Amortization Changes in NWC WACC 12.77 3.07 3.67 COGS Revenues (27.88) Selling.98) (0.53 1.38 42.81) (1.65) (0.96 0.64) (0.43) (40.98) EBT 2. & admin.06 3.50) (6.68 1.70 51.72 EBIT(1-T) 2.58) (0. Item 1.26 1.29 Note.Parkhomenko A.41) (0.02) (36.64 5.41 1.88 Discounted TV 19..09 1.13 2.98) (0. except EPS.55) (2. Russia 11/25/2006.15 Equity Value Price of Equity 11. 70) (0. Neuimin K.33 0.81 2..47) (0.V.68 1.03 2.66% growth rate 3.14 1.41 1.19) 0.40) (0.00% Terminal Value (2002) 20. Case Study in Corporate Finance-II: Managing Capital Structure 10 .58) (0.V.A.56 Discounted TV % of TV in overall value Equity Value Price of Equity 8. Grigoriadi E.68 Changes in NWC (0.Parkhomenko A.15 1.92% 8.70) 0.74) (0..06 (0.52) (0.72) (1.40 2.81 (1.25 38.15 0.22) (2.00 0.39) (0.00 Changes in Loans and Principals (0. Russia 11/25/2006.06 0. Moscow.53 1.68) 1.65 2.64) (0. Rosario Acero S.A. Martynova N.12) 0.V.81 1.07) (2.45% Ke 16.77) 0.83) (1.70 2.65) (0..26 Θ (Debt to Capital) 55.03 1.07 (0.30) (0.03 0.38 1.26 1.95) (2. Case Study in Corporate Finance-II: Managing Capital Structure FCFE Actual 1996 FCFE EAT CapEx Amortization Projected 1997 1998 1999 2000 2001 2002 2003 0.67) (0.37) (1.01) (0.E.7 Rosario Acero S.16 98. V.03 $1.03 $1.78 $2.61 1.46 $0.34 $1.55 0.48 $0.48 $4.48 $4.60% 14.45 $3. Moscow.03 $1.93 $0.12 0.45 Interest $0.68 $0.68% WORKSHEET FOR CALCULATING WEIGHTED AVERAGE COST OF CAPITAL Rosario Acero S.00 0.V.52 2.45 $3.40 $19.65 $1.11 $1.17 $1.17% 13.99 $1.54 $1.12 $1.48 $4.79 $1.17 3.23 ($0.01) Net Income $2.03 $1.91% 17.09 $1. Rosario Acero S.00 $0.67 $16.87 $24.03 $1.64 6.99 $2.03 $1.99 $2.34 0.16% Eff. Russia 11/25/2006.52 $3.V.16% 13.48 $4.00% 34.40 6.20 1.03 $1.03 $1.35 $1.66% 12.16% 14.60 Beta 0.01 EBIT/Interest ∞ 14.48 $4.45 $3.03 $1.E.11 0.03 CFO $3.55 1..22 $2.48 $4.83% 13.45 $3.00% 34.03 $1.48 $4.65 0.03 $1.Parkhomenko A.15 0.03 $1.00% 34.01 $0. Cov ∞ 13.00 $2.45 $3. Case Study in Corporate Finance-II: Managing Capital Structure Appendix 3 WACC WORKSHEET FOR ESTIMATING RATINGS/INTEREST RATES D/(D+E) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% D/E 0% 11% 25% 43% 67% 100% 150% 233% 400% 900% $ Debt $0.36 3.75 $1.46% 8.34 1.37 1..23 $0.48 EBT $3.45 $3.17 0. Tax Rate 34.32 1.03 $1.90 $0.57 $2.06 0.00% 34.48 $4.45 $3.09 1.12 ($0.03 EBIT $3.47 $8.16% 10.45% 20.66% 10.00% 33.00% 34.00% 34.70% EBITDA $4.73 $5.15% 40.26 $1.04 Cost of Equity Likely Rating AAA AAA AA A- BBB BB B B- CCC CCC Interest Rate 8.62 $0.00% 34.88% 15.86 2.35 ($0.03 $1.97 $2.46 $1.45 $3.41 0.12 4.28 $2.92 7.15% 14.16% 14.86% 9.15 $2.02% 25.45 $3.51 12.93 1.73 1. Grigoriadi E.03) Tax $1.99 CFO Int. Neuimin K.66 $2.10 $3.99 $1.31 $3.02) (+)Depreciation $1.80 $0.00 1.A.32 $0. Martynova N. Case Study in Corporate Finance-II: Managing Capital Structure 11 .46% 8.96 $1.32 $0.03 $1.03 $1.50 $0.96 $0.48 Depreciation $1.09 0.13 $21.20 $10.48 $4.37 3.A.37 1.29 CFO/Debt ∞ 1.00% 34.11 2.45 $3.03 $1.03 $1.24 0..93 $13. 83% 12.83% 13.00% 900. Case Study in Corporate Finance-II: Managing Capital Structure 12 .05% 11.60% 14.15% 40.70% Cost of debt 5. Rosario Acero S.11% 25.00% 90.41% 12.17% 13.02% 25.33% 400. New Firm Value = (EBIT*(1-t)+Depreciation-Capital Spending)/(New WACC-g) Rosario Acero S.V. Neuimin K.79% 12.00% 11.68% 9.34% 9.70% 7.82% 11.00% 150.A.00% 233.00% 20.67% 100.02% 8..08% 12.37% 6.00% D/E 0.51% 12.. Grigoriadi E.45% 20.03% 8.V.88% 15.00% 70.. Moscow. New Firm Value=Current Firm value +{(WACC(current)-New WACC)*Current firm value/New WACC} *Firm Value (G): Savings grow.00% 50.00% 60. Russia 11/25/2006.00% 42.00% 10.00% 30.58% 5.61% 11.52% 0 0 0 0 0 1 0 0 0 0 Firm Value (C) $25 $26 $27 $27 $28 $28 $27 $27 $26 $26 Firm Value (G) $23 $25 $26 $27 $28 $29 $27 $26 $24 $24 $ Debt *Firm Value (C): No growth in savings.85% 6.86% 66. Case Study in Corporate Finance-II: Managing Capital Structure D/(D+E) 0.00% 40.15% 14.E.V. Martynova N.00% $0 $3 $5 $8 $11 $14 $16 $19 $22 $25 Cost of equity 12.00% 80.A.39% WACC 12.58% 5.47% 11.91% 17.Parkhomenko A. 2899999 2.00% CCC 0. Rosario Acero S.5699999 5.00% CC 0.35 0.85 9.2499999 12.17 2.00% BB 2.65 6.E.649999 1.00% Rosario Acero S.00% A 4.1699999 3.V..25 0.8699999 7. Moscow.50% B+ 1.76 3. Russia 11/25/2006.2699999 6.29 4.50% BBB 2.00% B 1.7599999 2.V.49 5.8699999 4.25% A- 3.87 2.00% D -100000 0.67 0.50% C 0. Neuimin K.6699999 9. Martynova N. Case Study in Corporate Finance-II: Managing Capital Structure 13 .70% A+ 5..A.87 1. Case Study in Corporate Finance-II: Managing Capital Structure Damodaran’s Rating Rating Coverage Spread AAA 9. Grigoriadi E.V.4899999 1.00% B- 1.57 1.27 1.A.Parkhomenko A..30% AA 6.849999 1.65 100000 0. 39) 5.99) 3. Rosario Acero S.45 42.21 2.19 38.72 (2.32) (7.72 3.51 (40.52 (1.28 (1. Case Study in Corporate Finance-II: Managing Capital Structure Appendix 4 APV Valuing unleveraged company Income Statement Revenues COGS Selling..09) (2.75) Projected 1999 2000 1.V.06 (2. gen. All the figures are in millions of dollars.E..65) (3.80 (27.81 (44.18 22.19 2.70) 4. except EPS. EBIT Actual 1996 1997 1998 34.20 51.67 (48.38 (29. Russia 11/25/2006.70 (36.36 79. Martynova N.83% 3.39) FCFE EBIT(1-T) CapEx Amortization Changes in NWC Re growth rate Terminal Value (2002) Discounted TV % of TV in overall value Equity Value Price of Equity 1998 1. Neuimin K.55) 1.38 (0..68 (1.V.11) 12.63 2001 2002 56.14 (0.43) (6.19% 23.A.V.96) 3.81) 1.53 (1.15) 5. Moscow.00 .34 (33.50) 3.11 1.00% 37.94) (4.34 3.91) 2001 1.07) 4.01 2.88 18.88) (8.26 1.72) 1.83) (0.46 Rosario Acero S.72 (1.64 Note.82 Projected 1999 2000 46. & admin.02) (5.03 (0. which is nominated in dollars 1997 1.01) 2002 1. Case Study in Corporate Finance-II: Managing Capital Structure 14 2003 3.37 (2.Parkhomenko A.90) 1.68 0.68) 1.48 3.A. Grigoriadi E.10 62.31) 1.77 3.18) (6. 20% 5.02 2.00 1 673.26 22.71 1. Rosario Acero S.60% 5.64 75% 25% 300% 70 0.30% 5.00 0.00% 0.75 499 B 26.24 27.26 22.87 794 CCC 46.61 AA 0.80 5.87 125 BBB 2. Rating - 4. Moscow.40% 5.63 25.30% 5.02 3.39 24.61 AA 0.V.08 37.01 274.26 22. Martynova N..80 5.20% 5.64 60% 40% 150% 35 0.p.74 4.26 22.64 70% 30% 233% 54 0.80 5.36 2.A.11 0.80 5.64 100% 0% ∞ - ∞ 794 CCC 46.03 5.30% 0.52 4.36 499 B 26.00% 0.06 57.64 85% 15% 567% 131 0.61 AAA 0.56 10.40% 5.01 352. Russia 11/25/2006.88 24.64 80% 20% 400% 93 0.20 1.33 4.06 15% 85% 18% 4 6.33 499 B 26.80 5.00 1.26 22. b.41 40% 60% 67% 15 1.16 4.90 10.10 30.45 10.80 5.26 28.47 0.64 50% 50% 100% 23 0.41 45% 55% 82% 19 0.55 794 CCC 46.80 5.Parkhomenko A.26 22.50% 5.86 10.90 3. Case Study in Corporate Finance-II: Managing Capital Structure Value of leveraged company calculated with the usage of APV D/E EBIT/Inter est Debt Spread.00% 0.00% Interest Probability of default PV (BC) PV (Tax shield) Value of leveraged company D/D+E E/D+E 0% 100% 0% - ∞ 0.00 23.38 26.18 5% 95% 5% 1 20.80 5.00 1.55 35% 65% 54% 12 1.79 30% 70% 43% 10 1.26 22.64 65% 35% 186% 43 0.A.26 22.30% 0.73 125 BBB 2.16 25% 75% 33% 8 2.64 90% 10% 900% 209 0.00 1 053.V.80 5.61 A 0.80 5.61 AAA 0.40% 5. Neuimin K.31 0.02 4.61 A 0..64 55% 45% 122% 28 0.26 22.41 23.70 0.34 10.60% - - Rosario Acero S.10 2.64 95% 5% 1900% 441 0.60% 5.61 AA 0. Case Study in Corporate Finance-II: Managing Capital Structure 15 - - .61 AAA 0.00 0.50% 0.01 470.60 10% 90% 11% 3 9.V. Grigoriadi E.60% 5.97 25.31 125 BB 12.E.79 794 CCC 46.07 46.00% 0.58 20% 80% 25% 6 4.00 3 533.00 0.26 22.26 22.61 AAA 0.30% 0.80 5.61 AAA 0..33 125 BB 12. 61 AAA 0. Case Study in Corporate Finance-II: Managing Capital Structure ∞ 16 .65% 15% 85% 18% 4 6.00% 95% 5% 1900% 461 0.E. Martynova N. Rosario Acero S. t-student distribution D/D+E E/D+E D/E Debt EBIT/Interest 0% 100% 0% - 5% 95% 5% 1 21.85% 20% 80% 25% 6 4.00 3 698 794 CCC 100.61 AA 7.11 39 125 BBB 100.A.61 AA 3. Interest ∞ Rating Propability of default - 4.V.77 2 10.V..00% 80% 20% 400% 97 0.63% 30% 70% 43% 10 1.27 2 10..02 0 4.p.00% 100% 0% ∞ - 794 CCC 100.V. Grigoriadi E.21% 40% 60% 67% 16 1.00% 60% 40% 150% 36 0.93 4 10.00% 65% 35% 186% 45 0.09 48 125 BB 100.00% 70% 30% 233% 57 0.61 AA 15.87% 45% 55% 82% 20 0.61 AAA 1. Moscow.00% 75% 25% 300% 73 0.07 60 125 BB 100.00% 50% 50% 100% 24 0..31 1 4.16 Spread. b.00% 90% 10% 900% 218 0.A.14 3 10.41 2 10.61 A 32.61 AAA 0.01 369 499 B 100. Case Study in Corporate Finance-II: Managing Capital Structure Appendix 5 Operational Income Approach Propability of default of leveraged company.13 32 125 BBB 100.00% 0 4.18% 25% 75% 33% 8 2.00 1 103 794 CCC 100. Neuimin K.Parkhomenko A.00% - Rosario Acero S.61 AAA 0.46 1 4.61 AAA 0.00% 55% 45% 122% 30 0.00 1 751 794 CCC 100.14% 35% 65% 54% 13 1.00% 85% 15% 567% 137 0. Russia 11/25/2006.51% 10% 90% 11% 3 10.61 A 100.01 287 499 B 100.01 492 499 B 100. 09 48 125 BB 100.00 1 103 794 CCC 100.01% 35% 65% 54% 13 1.00% 60% 40% 150% 36 0.93 4 10. Martynova N.00% 50% 50% 100% 24 0.31 1 4. Russia 11/25/2006. Moscow.61 AAA 1.77 2 10.00% 0 4.p.16 Spread. Case Study in Corporate Finance-II: Managing Capital Structure Propability of default of leveraged company.27 2 10.01 492 499 B 100. Grigoriadi E.61 AAA 0.00% 95% 5% 1900% 461 0.V. 1/3 deviation D/D+E E/D+E D/E Debt EBIT/Interest 0% 100% 0% - 5% 95% 5% 1 21. t-student distribution.61 A 36.V.20% 30% 70% 43% 10 1.78% 15% 85% 18% 4 6.00% 85% 15% 567% 137 0.61 AA 20.54% 45% 55% 82% 20 0.61 AAA 1.61 A 100.94% 40% 60% 67% 16 1.07 60 125 BB 100. Case Study in Corporate Finance-II: Managing Capital Structure ∞ 17 . Interest ∞ Rating Propability of default - 4.61 AAA 2.61 AAA 2.02 0 4.00% 55% 45% 122% 30 0.01 369 499 B 100..61 AA 12.A.25% 20% 80% 25% 6 4..E.01 287 499 B 100. Neuimin K.11 39 125 BBB 100.00% - Rosario Acero S.95% 25% 75% 33% 8 2.13 32 125 BBB 100. Rosario Acero S.00% 70% 30% 233% 57 0.44% 10% 90% 11% 3 10.61 AA 7.00% 90% 10% 900% 218 0.00% 65% 35% 186% 45 0. b.00 1 751 794 CCC 100.00% 80% 20% 400% 97 0.00% 75% 25% 300% 73 0.00% 100% 0% ∞ - 794 CCC 100..46 1 4.A.V.Parkhomenko A.41 2 10.14 3 10.00 3 698 794 CCC 100.