Michael Milken: The Junk Bond King Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Michael Milken: The Junk Bond King Case Solution

Introduction

Michael is an investment banker that proceeds it's working in the JunkBond Market in the year 1980 and was penalized to jail under civil court law for entreating guilty because of tax-related misdemeanors. Michael proceeding with a new wave of (LBOs) that affect the overall structure of America.

Junk Bond

This type of bond consider a high risk of default in its period and it is also present in the market as the worst bond because most of the bonds are issued by organizations and governments.However, the junk bond is only issued by those organizations that faced high financial problems and present a high risk of nonpayment of investors’ interest or its principal amount(Livingston, 2020).

Michael Milken (Junk Bond King)

To establish Junk Bond factor Michael proceeds working in the high-yield bond market, which considers to not existent to the year the 1970s. However, Michael makes this market generation of about ($125 billion) in the year (1987) and considers a high profit that is double his salaryand considers other bonusesof about($45 million) between the years (1983 to 1984)(Tom Nicholas, 2016).

This process helped entrepreneurs and those organization that are new and growing in the industry and because of this process, Michael's organization do not need billions in their assets they only need Michael to geta triple-credit rating. Moreover, after the era of the 1980”s there are various factors rise that made Michael's process down because of its deal-making practicesMichael also consider to be guilty of dealing with Boesky that previously consider guilty because of insider trading charges.

Junk Bond and its Leveraged Buyouts

In the period of (1980), the Junk Bond market was increasing because of obtaining most of the major ownerships in the public organization because of leveraged Buyouts (LBOs)(Tom Nicholas, 2016). In this situation, self-financing is considered irrational but the target is considered tobe the major companies, so then the financing is occur (40% to 90%) of debt. Michael presents itself in a market as a competitive leader and works on the behalf of its clients.

Critics and Legal Problems inside the Junk Bond Market

Working inside the high-yield market helped Michael to generate a large amount of equity from its issuers and LBO sponsors. However, after it disclosed a high-yield bond offering it considers as an increasing cost for the issuers and decreased the potential returns for the holders of Junk Bond.The Legal Problem was raised after the 1980s with federal authorities after dealing with Boesky, which caught providing inside information about the trading market. This Junk Bond market trading charged a case of legal violations under the civil court. Michael working disclose that he inappropriately use knowledge of securities(Chuback, 2020).

Michael's Investment Philosophy for the Junk Bond Market

Their main philosophy of Michael towards the bond market and finance is that he believes finance is an art there is no right or wrong in this market. It is a simple understanding of the future of the organization and the way to create structured transactions. This philosophy of investment presentsa practice of shareholders for the gratitudeof the evolution from the industrial to the service economy(Hudson, 2021). Its main practice in this market is motivated because of his belief that bonds providing highyields are not considered to be risky on the issuance from promising organizations as their credit evaluation specified...................

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Michael Milken: The Junk Bond King Harvard Case Solution & Analysis