Case deluxe corporation

deluxe corporation debt analysis

Then known as Deluxe Check Printers, the company was a pioneer in the emerging check printing business, and specialized in imprinting personalized information on checks and checkbooks.

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what financing requirements do you foresee for deluxe in the coming years?

Risks Associated with Deluxe s Business Strategy: Firm had gone quite far in terms of share repurchase, now they only had an option of debt financing The check printing business was down and they did diversify from their core business but they did not do away with core business.

Some large institutional investors for example, pension funds and charitable trusts were barred from investing in noninvestment-grade debt, and many individual investors shunned it as well. Singh sensed that those measures would only carry the company so far and that the board was looking for other alternatives.

Mosner, had led a major restructuring of the firm whereby he rationalized its operations, reduced its labor force, and divested several noncore businesses.

The individual estimates of Ke were then averaged within each bond-rating category. Furthermore, there were several regional companies active in this sector that had the potential to be strategic partners for Deluxe.

The current situation in the debt markets was favorable as the U. If for any reason, they were unable to access the commercial paper markets, they would rely on their line of credit for liquidity.

While he admitted that the eventual demise of the paper-check business was a certainty, he insisted that there were still growth opportunities for the company: We dont want to abandon the core business too soon. From to , Deluxe Corporations compound annual rate of sales growth was 4. Jamal M My feelings? Therefore, the debt equity ratio for AAA is , which is a bit lower when compared with the debt equity ratio for BBB bond. If for any reason, they were unable to access the commercial paper markets, they would rely on their line of credit for liquidity. Rajat Singh leafed through the analyses and financial data he had gathered for his presentation to Deluxe Corporations board of directors. Company management is supposed to provide the board with valid recommendations on why some method of increasing the company value has been chosen over the other. In this regard, Rajat Singh, Deluxe Corporation advisor is considered to be one of the most skilled professionals in the field.

For example, the management should explain why debt method of financing has been chosen over other available methods of financing. The outlook for interest rates was stable, although any sign of inflation might cause the Federal Reserve to lift interest rates.

The penalty is not only in the form of higher costs, but also in the form of possible damage to the Deluxe brand. Kate I would like to express my appreciation for the amazing job you did for me.

This would only be done by bringing on some debt. Related Papers. The important thing, is to obtain the bond with the highest rating while still paying as little as it is possible and getting the highest return on capital. The forecast assumed that the existing debt would be refinanced with similar debt, but did not assume major share repurchases. Thereafter, Singh would have to recom- mend to the board the minimum and maximum amounts of debt that Deluxe could carry to achieve the desired rating. Complicating the assessment are low growth and technological obsolescence in the firms core business. The penalty is not only in the form of higher costs, but also in the form of possible damage to the Deluxe brand. Mosner, had led a major restructuring of the firm whereby he rationalized its operations, reduced its labor force, and divested several noncore businesses. For example, the management should explain why debt method of financing has been chosen over other available methods of financing. To add to this, the increase on the use of credit and debit cards are rapidly taking market share from the print checks industry.
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Deluxe Corporation Case