Raising Capital Via Bonds by Chempaka Paradise Inc Essay
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Raising Capital via Bonds by Chempaka Paradise Inc., Malaysia
This case is about Chempaka Paradise Inc. (CP) in Malaysia. It is the largest franchise that produces local health care products in Malaysia. In 1998, the global financial crisis adversely affected CP. The company had to embark on staff cutback and other forms of cost reduction. According to the current business plan, CP expects to open over 15 franchises in year 2015. To achieve this goal, the company needs to raise capital via long term investment, through the issue of bonds.
It is August 13th, 2008; another “Dismal Day” for CP’s Chief Executive Officer (CEO) and founder, Mrs. Zaleysha Abdullah. The 2008 financial crisis had led to severe cutbacks, since the beginning of November, which reduced CP’s payroll by over 15 percent. The payroll cutbacks and other cost reduction measures were painful; nonetheless, CP realized things could get worse as a result of the crisis. The financial crisis had caused massive problems around the world, causing stock markets to crash, large financial institutions to collapse or being bought over, and governments in even the wealthiest nations having to come up with rescue packages to bail out their financial systems.
CP, however, has always been guided by its business plan to ensure smooth business operations. This plan targeted that in year 2015, CP must have at least 15 franchises. For this purpose, CP needed additional investments of about RM3 million to backup their financial requirements, whilst simultaneously achieving their goals. The Board of Directors thus decided to use long term investment via bond issue.
Chempaka Paradise Inc. or CP was founded by Mrs. Zaleysha Ahmad, almost 15 years ago. Mrs. Zaleysha is a native of Pahang. She graduated with a Bachelor of Education degree,