Stone Containers Corporation Harvard Case Solution & Analysis


This company was started by the Mr. Joseph in the year 1926. The nature of the company belonged to the cardboard container and its papers. They manufacture these items on the speciation of the card board making. The name of the organization is Stone Container Corporation which is very much famous in its field. Moreover, company is growing significantly by the means of acquisition through cash and borrowing funds. After Initial Public Offering, the company has been moving towards the expansion side to diversify its paper industry.

In the year 1987, Company borrowed heavy amount which affected on its capital structure. For the solution of this debt, they established sister concern for handling the debt with named as Stone Forest Industries. Further they acquired Bathurst Inc. in the conjunction with 3.3 billion debts which alerts on the gearing of the company. The main problem faced by the company was heavy debts due to the acquisition of the companies with respect to the debt amount and their interest payments. However, the company was trying to reducing its credit rating which was highlighting the company`s capital structure. For this problem, the company refinanced the loan with the elimination of the high-yield on the bond amount. This was against the regulation but the company had many options like swaps, convertible solution or restructuring the financing loan and exchange loan. One more option is the convertible preferred stock which is quite comfortable in the scenario of the company’s position. There were many changes with respect to price changes and the aspects of the financial statement which was necessary for the capital stability.

Problem Statement

The company has embarked a great success in the past in the form of acquisition but they failed to address the finance which was giving the red alert towards the capital of the company. They were failed to pay the interest of the debt which they had borrowed in many forms. Now they are facing the problems in the terms of five alternatives which are best according to them for the better financial health of the company.

They believed that alternatives will improve the debt position of the company. First alternative was the “debt relief avenues”, in this they negotiated with bank about the loan with extending their maturity period, second is to sold the interest of the subsidiary for the cash flow between $250 to $500, third option is to move to the extra bank debt with respect to the bond of five year with a coupon rate of 12%, fourth is to sell the convertible notes of the subordinate companies with coupon rate of 8% over 20% premium and fifth one is issue shares up to $500 by offering on the discount of 5%.

In all of these, the second and fifth alternatives are showing the best interest for the company. It will maintain the company's position with respect to the changings in the circumstances of the financial strength of the organization. Further, some analysis has done with respect to few queries about the financial statement and their changing effects. In the next heading it has been discussed.


The analysis have done with respect to the question and answer which are given from the case. There are around eight cases which are required to answer with respect to the changes of the environment.
Answer 1

Successful Growth during First Fifty years, Product Market Strategy, Financing Strategy

The company is in a good strength financially since five years. It moved to its extreme level of the growth and it have a good reputation in the market with respect to its existing environment. In its total tenure with respect to performance, they moved on with an average growth rate of 40%.

In the span of the year from 1986 to 1992, in which the sales moved from 61.6 billion to 85.2 billion. But the net profit decreased due to the increase in the interest cost which was raised due to more borrowings. The profit in the year 1986 was $6 billion but in the year 1992 it has been decreased to $0.97 billion which is such a big amount according to the company's position.

The product market strategy is the basic strategy in diversification of the product in different demographics and its respective parameters of the environment. It has efficient strategy according to the technique of the marketing. Although, it have good market hold but this market belongs to the manufacturer that provides best quality of the product........................

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