Case Studies in Structured

Finance
Sealed Air

Ian Giddy
August 2000

Questions :

1. Why did Sealed Air undertake a

leverage recapitalization ? Do you
think that it was a good idea ? For
whom ?

2. How much value was created ?

Where did it come from ?

Organizational effects of
leverage

Too little leverage

-waste of resources inside
organization
Inefficiency
Too much scrap, capital
expend.,
R&D

Too much leverage

-pushed to generate cash at
the expense of value
-too little inventory
-not enough credit for
customers
- skimping on quality, capital
expend, R&D

Sealed Air's changing

competitive environment
They had traditionally neglected
manufacturing in favour of marketing. able to do this because of a lack of
competition
About a year before the recap, they launched
a program of manufacturing excellence.

What to do with the cash ?

Understanding the Special Dividend Transaction

The Effect of the Recap on Firm Value and

Performance

Change in Shareholder Value over the year

following the Recap

High Leverage and Manufacturing Excellence

Organizational Effects of Leverage - already in

Changes in Organizational Priorities and Compensation

Turnovers in the Company's Investor Base

Implications of the case