H O O
REV: MARCH 4, 2002
The Loewen Group, Inc. (Abridged)
In March 1999, John Lacey and the management team at the Loewen Group, Inc., had to decide what course of action to take in light of the company's imminent financial difñculties. On January 22,1999, Lacey, a renowned turnaround specialist, was appointed chairman of Loewen, the
second largest death care company in North America. Headquartered in Burnaby, British Columbia,
Loewen owned over 1,100 funeral homes and more than 400 cemeteries in the U.S. and Canadá; it
also owned 32 funeral homes in the United Kingdom. The ...view middle of the document...
The company also took some steps to raise profitability and cash flows. It Consolidated various administrative functions at corporate headquarters and cut management overhead. It reviewed its pricing policies. Finally, it hired investment bankers to explore various financing options, includingasset sales, strategic partnerships, and outside capital investments in the company. However, the company's situation continued to worsen, and in mid-February 1999 Standard & Poor's downgraded Loewen's public bonds from B+ to B-, its fourth downgrade in less than a year. Loewen's stock price dropped 38% that day. In addition, Loewen would almost surely viólate certain covenants in its bank debt as a result of the company's 1998 financial performance, making it necessary to restructure the debt. Overall, in the twelve months prior to February 1999, Loewen's stock price fell by about92%, to $1.93, and its bond prices fell by 30%.
This is an abridged versión of an earlier case, The Loewen Group, Inc., HBS No. 201-062, which Professor Sruart Gilson prepared with the assistance of Research Associate José Camacho asthe basis for class discussion rather than to¡Ilústrate either effective orineffective handling of an administrative situation. Material inthis case and inthe original comes from published sources (public company documents and the general business press) and draws onresearch by David Gallo, Ian Reynolds, and Collin Roche (all HBS Class of2000), as reported intheir paper, "The
Loewen Group: An AutopsyofaChapter 11 Death Care Company."
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The Loewen Group, Inc. (Abridged)
on hand However, this would not be sufficient to meet several large interest and principal payments
Loewen had not yet missed any payments on its debt, and had approximately $30 miliorof-cash
that were due over the coming months. Apayment default would only make negotiations with creditors more difficult, and increase the likelihood of bankruptcy. This possibility would no doubt
weigh heavily on the managers' minds as they turned to the important task of restructur.ng the
The Death Care Business
Services; and related producís like cemetery...