Marvel Case Study
| Analysis of Bankruptcy and Restructuring at Marvel Entertainment Group | Case Study | | Team 8Anthony BorskiShawn KuehnHeather LuebbersVignesh Veer | 11/26/2012 |
1. Why did Marvel file for Chapter 11? Were the problems caused by bad luck, bad strategy or bad execution?
Marvel filed for Chapter 11 because they couldn’t adequately restructure their debt. In 1996 they got to a point where they were going to violate bank loan covenants and so they needed to restructure their debt. The bond holders wouldn’t agree to the proposed restructuring plan and this led the company to file for bankruptcy.
Marvel first got into trouble because of bad strategy and bad luck. Comic buyers tend to loyal, fanatical and maybe even a bit eccentric. If you change things around on them, you could lose that loyalty very quickly. Also comic books can go in and out of favor in a very cyclical way. Knowing these things, all the changes of prices, titles and styles in 1993 had the potential to be disastrous. And knowing the cyclical nature of the popularity of such things, just because times are good doesn’t mean you should be over spending. You should be putting some money in the bank for when things turn the other way.
In the same way, the trading card market turned then as well. This was partly due to a strike in baseball and partly due to a rise in the popularity of video games. But cards’ popularity is also cyclical.
Despite both of these downturns, Perelman kept on buying, which was a way to get companies cheap, but seriously weakened the company further. And the debt levels became too high.
2. Evaluate the proposed restructuring plan. Will it resolve the problems that caused Marvel to file for bankruptcy? As Carl Ichan, as the largest unsecured debt holder would you vote for the proposed restructuring? Why or why not? The proposed restructuring plan involved three parts. Part 1 called for Andrews Group to invest $350 million
1. Why did Marvel file for Chapter 11? Were the problems caused by bad luck, bad strategy or bad execution?
Marvel filed for Chapter 11 because they couldn’t adequately restructure their debt. In 1996 they got to a point where they were going to violate bank loan covenants and so they needed to restructure their debt. The bond holders wouldn’t agree to the proposed restructuring plan and this led the company to file for bankruptcy.
Marvel first got into trouble because of bad strategy and bad luck. Comic buyers tend to loyal, fanatical and maybe even a bit eccentric. If you change things around on them, you could lose that loyalty very quickly. Also comic books can go in and out of favor in a very cyclical way. Knowing these things, all the changes of prices, titles and styles in 1993 had the potential to be disastrous. And knowing the cyclical nature of the popularity of such things, just because times are good doesn’t mean you should be over spending. You should be putting some money in the bank for when things turn the other way.
In the same way, the trading card market turned then as well. This was partly due to a strike in baseball and partly due to a rise in the popularity of video games. But cards’ popularity is also cyclical.
Despite both of these downturns, Perelman kept on buying, which was a way to get companies cheap, but seriously weakened the company further. And the debt levels became too high.
2. Evaluate the proposed restructuring plan. Will it resolve the problems that caused Marvel to file for bankruptcy? As Carl Ichan, as the largest unsecured debt holder would you vote for the proposed restructuring? Why or why not? The proposed restructuring plan involved three parts. Part 1 called for Andrews Group to invest $350 million