Derivatives at Controladora Comercial Mexicana (CCM)

  • Reference: F-859-E

  • Year: 2008

  • Number of pages: 14

  • Geographic Setting: México

  • Publication Date: Nov 7, 2011

  • Source: IESE (España)

  • Type of Document: Case

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Description

The main pedagogical objective of the Comercial Mexicana is to show the use and abuse of derivatives. Comercial Mexicana - Mexico's third largest retailer of food and other items - faced the possibility of bankruptcy in 2008 after speculating on foreign currency, which exposed the company to US$1.9 billion of debt. The case explains the derivative type (TARN or Target Accrual Redemption Note) and goes into detail on the perils of trying to make money on financial instruments instead of focussing on core businesses (in this case, retailing).

Keywords

Balance Sheet Analysis Cash Financial Accounting Financial Analysis Financial Instruments Foreign Exchange Market Restructuring