Case 35 Deluxe Corp Essay

838 words - 4 pages

Deluxe Coporation is a large United States based firm that specializes in the printing of consumer and commercial checks and secure documents. The firm which is founded in 1915 is well established and currently holds nearly 50% of the check printing market share. As of the mid 1990s, the firm has recognized that electronic banking and payment instruments such as debit and credit cards are having a major impact on the check printing industry and can lead to a possible obsolescence of check usage in the near future. With a decline in check usage, Deluxe undertook a major reorganization which it divested non-strategic businesses and reduced its number of employees and facilities. The firm ...view middle of the document...

Deluxe Corp. sales were 60% through financial services, 16% through business services, and 24% through direct checks.
Hudson Corporation and Deluxe Corporation Managing Director, Rajat Singh assessed current and future financing requirements for the firm. Deluxe required additional financing for such general corporate purposes as working capital, capital asset purchases, possible acquisitions, repayment of outstanding debts, dividend payments, and repurchasing of the firm’s securities. Deluxe had three debt instrument proposals to meet short-term financing needs. The instruments include:
* Commercial paper: Deluxe maintained a$300 million commercial paper program which carried a A1/P1 credit rating. “The risk of a downgrade of Deluxe’s short-term credit rating is low,” Singh thought. “If for any reason, they were unable to access the commercial paper markets, they would rely on their line of credit for liquidity.” Deluxe had $150 million in commercial paper outstanding, at a weighted average interest rate of 1.85%.
* Line of credit: Deluxe had $350 million available under a committed line of credit, which would expire in August 2002, and $50 million under an uncommitted line of credit. During 2001, the company drew no amounts on its committed line of credit. The average amount drawn on the uncommitted line during 2001 was $1.3 million at a weight average interest rate of 4.26%. At year end no amount was outstanding on this line of credit.
* Medium term notes: Deluxe had a self registration for the issuance of up to $300 million in medium term...

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