AUGUST-NOVEMBER 2004
Syllabus
TEACHING
FACULTY
Prof. David Linnan (University of South Carolina)
COVERAGE
Corporate finance has several different faces. In the business school setting, corporate finance
is that part of financial economics dealing with the financial decisions corporations
make, and the tools and analyses used to make those decisions.
In the business practitioner setting, corporate finance is largely about
securing money in financial markets for business activities, employing quantitative
tools and analyses based on theoretical approaches developed as part of financial
economics. In the legal practitioner setting, corporate
finance largely divides on the one hand into the buying and selling of business
enterprises (mergers & acquisitions work), or on the other hand into working
in the financial sector as regulated industry. The financial sector work involves, in the
alternative, designing and implementing financial products on behalf of financial
intermediaries, or helping companies implement strategies to raise funds in
differing markets, or addressing enterprise risk through financial products
in a variety of markets. From the lawyer's
perspective, mergers & acquisitions work is largely an exercise in business
enterprise and securities law involving rights of equity holders, while financial
products work more often than not involves debt or derivative securities alternatively
in the capital, banking, money, or insurance markets.
Thus such financial products work is best understood as general financial
sector work carried out within overlapping markets for regulated (financial)
industries domestically and internationally.
To do his own job the lawyer needs to understand enough of the business
side of finance to make sense of what the client is doing buying and selling
companies, or raising funds. The lawyer's stock in trade includes working
these financial products and strategies under differing regulatory structures
in a financial sector progressively deregulating and internationalizing since
the late 1970s.
Following a general introduction, our corporate finance course concentrates
on project finance as a vehicle to explore general problems of domestic and
international corporate finance in the context of a specific infrastructure
finance strategy. Project finance refers
to the financing of long-term infrastructure, industrial projects and public
services based upon a non-recourse or limited recourse financial structure where
project debt and equity used to finance the project are paid back from the cash-flow
generated by the project (for example, borrowing to finance construction of
an electricity generating plant and then repaying said loan from the proceeds
of the sale of electricity generated by the facility). The course will be taught with an introduction
to the client's side of corporate finance, before treating the lawyer's side
through structuring, documentation and negotiation work.
MEETING
TIMES & PLACES
The class meets Mondays 08:00-10:10
Columbia time in the Law Library Videoconferencing Room and Wednesdays 13:00
Columbia time in Room 235. When joined
in September by Indonesian students, they will participate Mondays from the
UI-Salemba Videoconferencing Facility. Jakarta
time (GMT+7 always) is, depending upon the time of year, 11-12 hours ahead of
Columbia time (GMT-5 on regular time, GMT-4 on daylight savings time;
Columbia time changes from daylight savings to regular time on the last
Sunday in October). The Wednesday meetings in Columbia will normally
be in the nature of a lab to discuss matters like document drafting or negotiation
assignments. Separate arrangements will
be made for these purposes with Indonesian students.
COURSE MATERIALS AND CONCEPT
The initial text is William Klein & John Coffee, Business Organization
and Finance: Legal and Economic Principles
(9th ed, Foundation 2004). Otherwise, instructional materials will be
posted on the course website (http://www.lfip.org/laws602/index.htm)
accessed via the Law & Finance Institutional Partnership or LFIP website
(http://www.lfip.org). We shall spend the first few weeks on Klein & Coffee to develop
a general framework for thinking about the overlap between law and business
issues in corporate finance. Thereafter
we spend a few weeks on the business school version of modern finance theory
before moving directly into project finance. At that point in time we shift in part to a
clinical mindset in working on some documentation. To the maximum extent possible, the course will be taught by the
problem method, under which you are required to read class preparation materials
posted as part of course materials, view some streaming video materials in advance,
and then prepare problems or
assignments posted on the course website for class discussion. I also hope
to import a few project finance practitioners via videoconferencing as guest
lecturers.
We have a course LISTSERV (laws-602@listserv.sc.edu)
to keep in touch generally. You must
join the listserv to fully participate in this class, since teaching faculty
will use it like a bulletin board for announcements about reading assignments,
etc. while students and faculty should use it to ask questions and carry on
discussions outside our videoconferenced classes. For those of you unfamiliar with the LISTSERV concept, a LISTSERV
is simply a system in which e-mail communications are sent to a single address
and then distributed to all LISTSERV subscribers. Please consult the LISTSERV information page at http://www.sc.edu/ars/listserv.html
for general directions, and click on the course webpage class administration
page for directions about how to subscribe.
You are encouraged
generally to read the newspapers/websites with an eye toward questions of corporate
finance and are invited to bring them up in class for discussion.
By course's end, you should understand the basic issues and legal framework
applicable in the broad corporate finance area.
ACCESSMENT
The primary contributor to your grade will be performance
on several deal structuring, documentation and negotiating exercises in the
form of group work (in groups of 3-4). You will also have a few simple assignments
of this kind individually. Your group
work will also include for certain exercises presentations of individual problems
for class (including powerpoint presentation and fielding questions).
Your group projects will incorporate an element of self-grading business-school
style, to make sure that all group members invest the required effort in their
work. The point of self-grading in that sense is
not to evaluate who had the best ideas within the group, but rather to ensure
that all group members do their fair share of the work. Incidentally, practicing lawyers largely work
in groups when doing corporate finance work.
PREPARING FOR
CLASS
To prepare each class you need to read the printed sources,
watch any related streaming video material in advance, then work the assigned
problems or exercises. Note that the
course website (http://www.lfip.org/laws602/index.htm) contains extensive link and quick reference pages
including streaming video. Some of the
streaming video will be assigned as class preparation, but if you have trouble
understanding certain topics take the time to look at more of the third-party
streaming video material to develop understanding independently.