Refinancing The Western Harbour Crossing Hong Kong Case Solution

Based on the liquidity ratio, it might be suggested that the company possibly face liquidity issues in the coming future. The quick ratio for both years is also showing the same as there are negligible inventories which are held by the company.  

As it is proposed that debt financing will be a significant component of the total acquisition value of the company. The debt holders will be better off from this deal as evident by the interest coverage ratio. The interest coverage ratio for 2006 is 3.12 which is marginally satisfactory. It indicates that the company can entertain the markup outstanding on its debt facilities. Hence, it provides a cushion to the bond or debt providers. In addition to that, current financial leverage of the company is low which highlights that the company can avail further debt financing without significantly increasing its financial risk. 

The operating profit margin of the company is also healthy and the company successfully able to report an operating profit margin of 36.32% in 2006. However, the earning per share is considerably low which shows which might be the cause of repelling major buyers. However, the return of assets is on the relatively higher side. Same is the case with the return on investment which has an increasing trend.

The repayment of debt will be supplement by the new toll adjustment mechanism. The Western Harbour Tunnel Company Limited incorporated an innovative toll adjustment mechanism for the operation of the WHC. This mechanism will act as a tool to control profit which will ultimately result in timely repayment of debt.