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Williams

National University of Singapore
NUS Business School



BMA5312 Advance Corporate Finance

Case Analysis: Williams

Submitted By:
Bansal, Ankur HT065019M
Kaushik, Anshuman HT065025R
Lucman, Christian Ade HT065048B
Plange, Victor NT070696J
Vardrup, Kasper NT070681E



INTRODUCTION:

William is a Tulsa based company that is into the energy related businesses including the exploration and production, pipelines, energy trading and telecommunications. It is suffering from a decline in the energy markets owing to the crash of Enron, pressure on margins in the telecommunications business owing to oversupply and inquiries by the regulators into alleged financial improprieties.

Oversupply in the telecommunications business has led to a decline in profits and margins in the industry forcing many players to back out of this sector. This goaded the Williams enterprise to guarantee an indirect credit support for $1.4 billion of WCG's debt. At the same time, the deterioration of the energy industry resulted in more stringent requirements for the credit rating of investment grade companies. In response to those requirements, Williams initiated, at the end of 2001, a number of initiatives to "bolster its balance sheet" in order to maintain the company's investment grade credit rating. These initiatives included large asset-sales (to be used to reduce outstanding debt), reduction of capital expenditures and reduction of quarterly dividends paid on the company's common stock. Additionally, the company completed the sale of $1 billion equity based securities called "FELINE PACS". But despite these initiatives, Williams' credit rating was downgraded to B1 in July 2002 (Source: Case - Exhibit 4).

The decline in the credit rating has hampered William's ability to...