EOG Capital Funding

ISBN 0-538-88791-5

Case Teaching Package
A case teaching package is available for this case. It includes strategies for case presentation, key concepts, solutions to the assignment questions in the case, and suggestions for the most effective ways to work this case into your course.

Length
This case is 12 pages in length and its case teaching package is 6 pages.

Abstract
EOG, a large utility, has a well-established commercial-paper, bond, and equity financing program that is managed by its financing subsidiary, EOG Capital Funding. Despite EOG's adequate financing and occasional surfeits of cash, the subsidiary is considering regularly issuing medium-term notes (MTNs) in the United States and abroad. Because an MTN program allows for the continuous offering of 9-month to 15-year notes, its proponents believe it would give the company flexibility in meeting a variety of financing needs, reduce the risks inherent in large, long-term bond issues, possibly bring in more funds than same-sized bond and commercial-paper issues, and broaden the base of investors who would be interested in EOG's offerings. The program would require some up front and ongoing costs, however. In addition, embarking on an MTN program would require EOG to participate in financial markets in which it has little experience.

Fit Within a Course/Linkages to Textbooks or Journal Articles
This case is intended for use with advanced undergraduate business students who have had basic finance courses, graduate students, and executive-education students. It would be useful in a course that covers corporate finance or international corporate finance. The case was designed to be taught primarily using in-class discussion.

Study Questions

1. Is an MTN issue an appropriate strategy for EOG at this time?
2. If EOG were to initiate the MTN program, should it remain strictly domestic? Be sure to discuss both sides of the argument concerning this decision, i.e., domestic and international.
3. Considering the response to the previous question, which investment banker should EOG choose and why?