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EBIT
INTEREST
NET INCOME
PRFD. DIVIDEND
NET INCOME, COMMON
EPS
TOTAL ASSET
DEBT
PRFD. STOCK
COMMON EQUITY
MII
HMC
million $ except EPS, times interest
259
123
25
210
134
-49
0
17
134
-66
1.4
-0.69
2600
4600
400
2600
0
200
800
600
TIMES INTEREST
DEBT % BOOK CAPITAL
10.4
33%
0.59
76%
Recommendations: After split off, the bond rating of HMC would downgrade to
speculative and there is a possibility that bondholders might file case against the
company. But the company can benefit from the fact that none of the long term
debt contained event risk covenant. Considering the recent rulings in favor of
companies who have gone for leveraged buyout option and also company does not
have any other ways to raise capital for now, we would suggest to go ahead with
the split.