Loewen Group
The Loewen Group Inc.
Case Report – Session 3
Group 6
Executive Summary
This report provides a qualitative analysis of the Loewen case study, starting from the excessive debt policy used in its expansion and ending with huge debt ratios and bankruptcy.
The analysis includes the effect of the company’s policy and the financial distress it caused and results of such a financial condition.
Method of Analysis:
For the analysis we have used the historical financial data of the company, the history of the company and its financing policy, and the financial data of its competitors.
Findings:
The important finding that were gathered are listed below * Debt financing is considered the fastest and cheapest method in financing the growth of a company * Excessive debt financing for explosive growth is not well recommended * Financial distress factors are direct and indirect, and they vary in importance and effect on the overall future of the company * Filing Chapter 11 bankruptcy protects the company from its debtors by allowing it to reorganize their debt structure, which might seem the best option in this case.
Options/Recommendations:
We found out 2 options that Loewen could undertake.
Option 1: selling assets to increase cash position and decrease debts
Option 2: file chapter 11 bankruptcy to give the company another chance in Legal time to reorganize its debt structure.
Recommendation: filing bankruptcy seems to be the best option that Loewen has at this time, as it will allow it to startup its operations again and try to fix debt problems it faced by restructuring.
Q1. How was Loewen group able to grow explosively for the first half of the 1990s? What were the advantages of debt financing enjoyed by the company in this phase?
The Loewen group started as a family business in the 1950s, and had grown explosively in the late 1980s and early 90s mainly by acquiring small independent funeral homes and cemeteries in
Case Report – Session 3
Group 6
Executive Summary
This report provides a qualitative analysis of the Loewen case study, starting from the excessive debt policy used in its expansion and ending with huge debt ratios and bankruptcy.
The analysis includes the effect of the company’s policy and the financial distress it caused and results of such a financial condition.
Method of Analysis:
For the analysis we have used the historical financial data of the company, the history of the company and its financing policy, and the financial data of its competitors.
Findings:
The important finding that were gathered are listed below * Debt financing is considered the fastest and cheapest method in financing the growth of a company * Excessive debt financing for explosive growth is not well recommended * Financial distress factors are direct and indirect, and they vary in importance and effect on the overall future of the company * Filing Chapter 11 bankruptcy protects the company from its debtors by allowing it to reorganize their debt structure, which might seem the best option in this case.
Options/Recommendations:
We found out 2 options that Loewen could undertake.
Option 1: selling assets to increase cash position and decrease debts
Option 2: file chapter 11 bankruptcy to give the company another chance in Legal time to reorganize its debt structure.
Recommendation: filing bankruptcy seems to be the best option that Loewen has at this time, as it will allow it to startup its operations again and try to fix debt problems it faced by restructuring.
Q1. How was Loewen group able to grow explosively for the first half of the 1990s? What were the advantages of debt financing enjoyed by the company in this phase?
The Loewen group started as a family business in the 1950s, and had grown explosively in the late 1980s and early 90s mainly by acquiring small independent funeral homes and cemeteries in