Debt Policy At Ust
Debt Policy at UST Inc.
1. What are the primary business risks associated with UST Inc.? What are the attributes of UST Inc.?
Evaluate from the viewpoint of a bondholder. (Your answer should be more qualitative than
quantitative!)
The following factors weave into the risks and attributes of the company from the creditors’
point of view:
A. UST had seven pending health related lawsuits at the end of 1998. The outcomes of
these suits are uncertain. Despite the major Medicaid state settlements, lawmakers
are expected to continue to push for new laws to combat youth tobacco use. Other
litigation against tobacco companies is expected to continue, especially suits filed by
individuals. This uncertain litigation and legislative environment makes the future
cash flows of UST risky
B. UST is a dominant player and market leader and its strategy is to combat entrants by
launching similar products, rather than cutting prices. But the recent market erosion
by small companies has......
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