Business Case Studies & Business Publications

Flagstar Companies, Inc.

Eades, Kenneth M.,...

Case

Flagstar Companies, Inc.

Eades, Kenneth M.; Brownlee, E. Richard II; Kostel, David

F-1186 | Published April 17, 1998 | 22 pages Case

Collection: Darden School of Business

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The CEO of Flagstar Companies faced the task of finding a solution to the company's cash flow problem. A leveraged buyout in 1989 had saddled the company with large principal and interest payments. To meet the company's financial obligations, the CEO had cut back on capital expenditures that could otherwise have been used to grow Flagstar's businesses and upgrade existing facilities. Now, it had become apparent that trimming capital expenditures would put the company at a significant competitive disadvantage, and a significant inflow of cash or reduction of the debt balance was necessary for Flagstar to remain a viable company.