8/10/2019 Hutchison Whampoa

1/1

FIN3101A Corporate FinanceInstructor: Professor Allaudeen Hameed

CASE 2: HUTCHISON WHAMPOA LIMITED: THE CAPITAL STRUCTURE

DECISION

In preparing for the write-up and discussion of this case, please answer the followingquestions. (Detail requirements for the written report are given in the course outline).

1. Assume Hutchison Whampoa (HW) is considering external financing of either US$1billion or US$3billion in 1996. Assume that new equity can be raised at $48 a share andthat a long-term debt issue will carry an interest cost of HIBOR plus 70 basis points(bps). How would an equity or debt issue impact on HWs financial position andperformance? Assess HWs capital structure in light of its future financing needs.2. What bond rating do you think Hutchison Whampoa will be able to obtain from

Standard and Poorsor Moodys?3. What kind of capital structure would you propose to HW and why?4. A summary of the financial statement for HW for the years 1996 to 2013 is provided inthe excel file for Hutchison Whampoa (available on IVLE). These figures are taken fromHWs annual reports. Comment on the changes, if any, in HWs capital structure overthis period.

The case report should be done in groups assigned. The deadline for you to hand in thewritten case report (hard and soft copies) is 6pm on Wednesday, October 29, 2014.Please drop off the hard copies in the box outside my office (room MRB 07-74). The casediscussion will be conducted on November 4, 2014.