But the restructuring plan would leave Kraft with a debt of $12.4 billion.
At the $12 price it estimates for the common stock after market adjustments, the value of total shareholder’s equity in the company would be worth less than $1.5 billion.
This makes Kraft a highly leveraged company with 90% debt and 10% equity.
Such a capital structures leaves very little margin for error if things do not go as planned.
On the other hand, the advantage of a highly leveraged company is that, if things go a little better than it hoped, profits to the small shareholder base would be enormous.