Premier Foods Plc: Interest Rate Swaps

Case Solution

Jumana Zahalka, Anand Srinivasan
Ivey Publishing ()

A vice president of a hedge fund must decide whether his fund will acquire a 5 percent stake in Premier Foods Plc (Premier). At the time of the proceedings, Premier, a publicly traded British food and drink company, was heavily in debt after a period of aggressive growth in acquisitions. In addition, Premier had issued interest rate swaps on most of its debt. As the financial crisis resolved, interest rates fell dramatically and Premier’s interest rate swaps seemed to continue to weigh on the company. With that in mind, the case sets its ultimate goal of simulating the VP’s analysis of the company’s debt, interest rate swaps, caps and floors before deciding whether to invest in Premier.

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