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254830128 Group 4 Williams SFM

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1) Evaluate the terms of the proposed $900 million financing from the perspective of both parties. How would you calculate the return to investors in this transaction? If you need more information, what information do you need? 2
Q2) What is the purpose of each of the terms of the proposed financing 3
Q3) Conduct an analysis of Williams’ sources and uses of funds during the first half of 2002. How do you expect these numbers to evolve over the second half of 2002? What is the problem facing Williams? How did it get into this situation? How has it tried to address the problem it is facing? 3
Q4)Some might describe Williams as “financially distressed.” What evidence is there that Williams’ business may be compromised as a result …show more content…

Default provisions are always required to make sure the amount invested is recovered fully.
Q3) Conduct an analysis of Williams’ sources and uses of funds during the first half of 2002. How do you expect these numbers to evolve over the second half of 2002? What is the problem facing Williams? How did it get into this situation? How has it tried to address the problem it is facing?
Reasons for financial distress and problems Williams is facing
a) Write-off of investment in WCG
During the Tech Bubble, the whole telecom market that WCG was involved in suffered a lot of problems due mainly to a large oversupply, as indicated by an estimated 2% to 5% of the fiber- optic lines which were only carrying traffic. The revenue of WCG eventually plummeted, wherein prices of the lines decreased by more than 90% from 1998 and 2002.
In July 2002, the telecommunications sector was experiencing a lot of problems. WCG itself also began to experience a lot of financial stress, and in hopes of supporting it, Williams converted notes to shares, providing “credit support” of $1.4 billion of WCG’s debt (which Williams listed as an off-balance sheet item). In the end, Williams took a one-time accounting charge of $1.3 billion of guarantees and payment obligations. The problems with WCG ended up affecting Williams as well, causing Williams’ net income after extraordinary items to plummet.
b) Unforeseeable market conditions for energy trading
Because of the collapse

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