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Wells Fargo Case Writeup Essay

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Below is an essay on "Wells Fargo Case Writeup" from Anti Essays, your source for research papers, essays, and term paper examples.

Wells Fargo, headquartered in San Francisco, California, was a company with $349 billion in assets, and a 151 year history of doing business. The Company specialized in providing numerous types of financial services, including banking, insurance, mortgage banking, and consumer finance. Additionally, it participated in the retail, corporate, and commercial banking markets through its subsidiaries. Wells Fargo was a large company, with nearly 20 million customers, 5,000 branches, and 127,500 full-time employees.
In April of 2003, Howard Atkins, CEO of Wells Fargo, began to consider the possibility of issuing convertible debt securities. This was the first issuance of this type for the Company, and as such Atkins met with bankers from Morgan Stanley to go over the details.   Credit-wise, Wells Fargo was one of the strongest financial service company, and could generally issue debt relatively cheaply as a result of their very strong credit rating. When considering whether or not to continue pursuing the convertible securities option, Atkins considered the fact that Wells Fargo was very prevalent in the capital markets, which allowed the Company to have room to be opportunistic, and take on some reasonable amount of risk. Additionally, the bank could be opportunistic as a result of a huge core of deposits, previous issuances when the demand was present, and the Company was well hedged with actively managed positions in the more liquid derivatives market.
One important consideration in the decision to issue convertible debt is possible ratings agency action. In general, issuing debt adds risk to a company’s balance sheet, which is something that ratings agencies look poorly on. As a result, if the ratings agencies believe the company to be increasing leverage levels too much, they may downgrade their credit rating. As previously stated, one of Wells Fargo’s chief financial strengths was its strong credit position, and a credit rating downgrade could significantly damage...

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