Case Solution for The Case of Sovereign Wealth Funds: A New (Old) Force in the Capital Markets

Complete Case details are given below :

Case Name :      The Case of Sovereign Wealth Funds: A New (Old) Force in the Capital Markets
Authors :           Yiorgos Allayannis, Rachel Loeffler
Source :             Darden School of Business
Case ID :           UV1059
Discipline :        Finance
Case Length :    09 pages
Solution Sample availability : YES
Plagiarism : NO (100% Original work)
Description for case is given below :
In mid-January 2008, Merrill Lynch announced a $6.6 billion mandatory convertible-preferred share issuance, much of which was placed privately with the Kuwait Investment Authority (KIA), the Korean Investment Corporation (KIC), and the Mizuho Corporate Bank. The case is set amid the subprime-mortgage crisis, which plagued banks and depleted their capital. It focuses on the decision of John Thain to issue capital and place it with sovereign wealth funds (SWFs) in an effort to stabilize the company and put it on the road of growth and profitability again. The case describes the various types and origins of SWFs, their orientation, and their recent intensive investment activity in the global financial-services sector. The case also discusses the transparency of SWFs and their role in the global financial system as liquidity-providing long-term players. Finally, Merrill Lynch’s decision to issue the specific financial instrument to replenish its capital (mandatory convertible-preferred) and its terms are analyzed.
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