Essay Marvel Entertainment Group

Words: 2909
Pages: 12


In December 1996 Marvel Entertainment Group filed for bankruptcy. Marvel came up with a reorganization plan that meant that Perelman, Marvel’s largest shareholder, would invest $365 million in exchange for 427 million newly issued shares. Carl Icahn, one of the main bondholders, did not support this plan. On March 7, 1997, a confirmation hearing was scheduled at which both parties would vote on the proposed reorganization plan.

In this case study, we will first look at why Marvel filed for bankruptcy. Then we will evaluate the proposed restructuring plan and explain why it will not be supported by Carl Icahn. Moreover, we will explain why it will be more difficult for Perelman and his holding companies to issue debt in
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Moreover, the revenue generated by Toy Biz could be used to offset $100 million of net operating losses and for Marvel’s debt.

Regarding the public debt holders, the plan proposed that they will exchange debt for shares by seizing their collateral shares and holding 14.6% of the new shares. Considering that the bondholders bought the debt at 22% of the face value, this means that a share was valued at ($894.1 million * 0.22)/77.3 million= $2.54. Even though this was still a good exchange ratio, given the market value of $2.75, there was a huge difference between this valuation and the $0.85 per share that Andrews Group would have to pay. A positive aspect of this part of the plan was that all the secured and unsecured creditors would be paid in full.

The plan might be adopted because many stakeholders have incentives to support it. For example, the secured and unsecured creditors will vote for the plan because they will receive their money back in full amount. The equity holders are also interested in voting the plan since they will have a chance of getting the company back on its feet and increase the value of their shares. Even though the plan might be risky, if they do not vote for it they might lose everything in case of liquidation. One argument that this plan could be successful is that the cash flow from Toy Biz could prove to be very important and if the management