Massey Ferguson
In contrast with its competitors, Massey Ferguson chose to finance its expansionary agenda primarily through debt offerings and short term credit lines. This type of structuring had very detrimental implications for Massey Ferguson. The use of so much leverage would increase the risk of the projects they were undertaking beyond the industry standard. Firms in the same industry such as Deere and International Harvester throughout the 1976-1980 period maintained debt/capital and STD/capital percentages consistently lower than Massey Ferguson(a trend that exacerbated as time went on). Therefore if the farm equipment market were to weaken, relatively, Massey Ferguson would find itself in a less favorable position.
Along with the increase of risk on projects, the heavy use of debt financing also restricted Massey Ferguson's financial flexibility. Massey Ferguson's debt finance structure is spread out among 21 different lending institutions in over nine countries. Each one of these......
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