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2. Evaluate the proposed restructuring plan! Will it solve the problems that caused

Marvel to file for Chapter 11? Would you vote for the restructuring plan as a public

debtholder? What are the choices?

The proposed restructuring plan consists 3 main issues:

1. Perelman’s Andrews Group plans to invest $350 million into Marvel Group in exchange for $410 million new Marvel shares valued at $0.85 per share.

2. Marvel will use most part of the newly invested cash to acquire Toy Biz at a 32% premium. Toy Biz has a very close business connections with Marvel and is expected to generate approximately $60mn of cash flow every year.

3. The plan proposed that the public debtholders can exchange debt with the shares of newly recapitalized firm with the face value of 894.1mn.

The aim of the issue is mainly to provide liquidity to the company and to eliminate the public debt. To provide liquidity, Andrews Group would invest $350 million in Marvel by means of recapitalization. Besides, acquiring the Toys Biz can decrease the tax burden by sharing the NOLs. In addition, the restructuring aims to eliminate the debt burden of the firm by using the equity in exchange of the retirement of the public debt. The whole liability level would be decreased.

To evaluate to proposed plan, we think this proposal may not be the best way to solve the problem, but still better than going liquidation. By issuing the new shares to the existing public debtholders, the total debt level could be decreased. However, the $350 million new capital would be mostly spent on a new acquisition of Toy Biz. The restructuring plan is just a repetition of the failure in the past, and is incapable of completely solving the problem. The reason led Marvel into such problem is its wrong operating strategy; however, the restructuring plan seems like following the old strategy.

In the proposed restructuring plan, the most unfavourable party is the public debtholders. When the debt is first...