Sunbeam-Oster Company, Inc. Harvard Case Solution & Analysis

Sunbeam-Oster Company, Inc. Case Solution


The case revolves around the Sunbeam-Oster Company Inc. whichis facing some going concern problems and therefore, the management of the company faces many threats which it has to deal with. The management has decided to reorganize the company which it also did few years back when faced with a similar situation.
Main Parties of the Case

The following are the main parties to the case and it is their actions that can decide the future of the bankrupt company;
Sunbeam-Oster Company, Inc.

It is a large recognized company that manufactures and sells consumer products. The company has developed a brand name which is worth most in the consumer product.Moreover, itwas incorporated in 1929 in Pennsylvania.
The company, in the 1970s, tried to diversify its product lines so that it could become more efficient and could reduce its dependence on labor-intensive procedures;therefore the company started investing internationally and acquiring consumer products companies. This expansion allowed the company to grow quickly but the growth was for a short term and the company incurred huge losses for a long period. The management of the company thendecided to focus on core business of the company and therefore, itperformed restructuring at all levels of the company which showed good results quickly for the investors.
Now the company is again facing difficulties in operating and this time the reason for distress is the overburden liabilities for which the company has to pay interest annually. Also, the creditors of the company are not accepting a change in the financing structure. Therefore, the management of the company has filed for bankruptcy.
Japonica Investment Firm
Japonica is an investment firm, which was founded by Mr. Kazarian in 1987. Mr. Kazarian and Lederman manage the resources of the firm. The partners at Japonica are seeing an opportunity in the Sunbeam-Oster Company, Inc. They believe that the company is undervalued and by taking a little more positive approach to management of the company’s creditors,thenthe firm’s value could be increased. Due to this Kazarian and Lederman have performed a due diligent analysis of Sunbeam-Oster Company and found many interesting things that might proof there expectations to be right.

Problem Statement

The main problem that arises in the case is that Sunbeam-Company is facing financial difficulties and the management believes that capital restructuring can provide good results for the shareholders and creditors. The creditors of the company want their claims to be fulfilled in cash and are having a conflict with the management of the company regarding the true value of the company.

The reason for conflict is that the management plan provided by the company was too much conservative and the creditors believe that company cash flows can be better. Therefore, the creditors of the company had disapproved of venture or financing of the company.

The management of the company is new as the experienced directors of the company had all left in a very short period at similar time; therefore the management is young and does not have all understanding of the company processes.
The young management has taken a wider perspective as it believes that if creditors do not accept this value thenthestakeholders may suffer from their decision, such as employees, suppliers and etc..Thus,the management had to file a bankruptcy under the chapter 11....................

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