Case Solution for Leveraged Buyout (LBO) of BCE.: Hedging Security Risk

Complete Case details are given below :
Case Name :      Leveraged Buyout (LBO) of BCE.: Hedging Security Risk
Authors :           Colette Southam, Ahsen Amir-Ali, Samir Meghji
Source :             Ivey Publishing
Case ID :            908N23
Discipline :        Finance
Case Length :    07 pages
Solution Sample availability : YES
Plagiarism : NO (100% Original work)
Description for case is given below :
In 2007, an analyst in the derivatives group of investment bank Grenfeld & Co. was asked to devise a hedging strategy for Providence Equity Partners (Providence) in Bell Canada Enterprises (BCE Inc.). Providence was based in the United States and any strategy would involve significant foreign exchange rate risk due to the conversion of returns into U.S. dollars. The analyst needed to consider several long-term hedging strategies that Grenfeld & Co. could recommend to Providence. Her vice-president had asked that she create a hedging strategy by initially assuming a 25 per cent IRR for the investment and its performance, based on two outcomes at the end of the investment (investment horizon = five years): a zero per cent IRR and a 25 per cent IRR.
 
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