The Restructuring of The Loewen Group
Prof. Ian Giddy, New York University
The Loewen Group (HBS Case 9-201-062)
In early 1999 the Loewen Group, the second largest funeral
company in North America, faced a financial crisis. Not only had the
company's stock price plunged, but more urgently the company had $42
million of debt payments coming due in April. It seemed unlikely that
the company would be able to meet these obligations. Facing possible
bankruptcy, the company had to work out how to possibly restructure its
- What was the source of Loewen's problems? Were they
financial or operational?
- What kind of financial restructuring would you propose to
the company's banks?
- Will this offer a solution? What else might be necessary?
What other restructuring can you suggest?
- Group 1: Loewen management. You are about to meet with the
Creditors Group. Please propose a debt restructuring that will be
satisfactory to the creditors while at the same time giving
shareholders the best possible deal they could reasonably expect. The
proposal should offer banks and bondholders a new deal that could
include deferred repayment of principal, deferred interest, equity
participation, or other combinations that are better than what the
creditors hold now. It should also give the lenders an incentive to
- Group 2: Creditors Group. You are a committee representing
the secured creditors. Please propose a restructuring that improves
your position while averting a Chapter 11 bankruptcy. In doing so,
estimate the value of the business and of the company's debt.
- Group 3: SCI. Now is your chance to buy Loewen. What's it
worth to you? Should you approach the new CEO, John Lacey? Or what deal
could you offer to the banks, assuming they are in the driver's seat at