Hydro Aluminum Consolidated (HAC). FINA 7360 Dr. R. Susmel. Presented by: Natalia Mora Aamir Nomani. Case Information. HAC, engaged in production & distribution of Aluminum CVRD (Companhia Vale do Rio Dolce) Alunorte, sub-division (Aluminum). Objectives.
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Dr. R. Susmel
Domestic Markets: S&P and BVSPA
World Market: MSCI World Index
i) 5% deposit of the proposed investment: Buy forward BRR for paying the deposit. If we know when CVRD is giving us the money back in case of loosing the contract buy a BRR put option for that time T.
ii) In case HAC's bid is accepted it needs to make a substantial investment in BRR denominated assets: For the net revenue amount after paying debt denominated in BRR. Sell 7-year BRR forward and Roll it over, or sell BRR forward today for each of the revenues from 99 to 05.
The Option: Convert credit to equity by acquiring CVRD’s common shares at a discount of 30% from the price.
CVRD's Infromation BRR USD
EPS 1998 2.67 3.23
Stock price Dec 98 9.32 11.2
Stock's SD 0.815
P ’05 = P/E ratio * EPS ’05
Strike Price using 1 USD165.4
Strike Price for HAC USD115.8
Strike Price using 2 USD102.2
Strike Price for HAC USD71.6