Marriot Corporation Case AnalysisTip: Yes, the idea of ​​dividing MC into two companies that separate real estate from the management of company services is cost-effective and has added value (Figure 1 ), then it should be recommended to the MC's board of directors. Since the plan is launched by distributing the same shares of special stock dividends to the original shareholders of MC, the shareholders of MC would be exempt from taxes for these special dividends they received since in the same period the company enjoyed a lower WACC and a payout of higher dividends (Exhibit 1). Additionally, the split strategy increases MC's opportunity to raise funds at a lower cost in the capital markets through Marriott International Inc. By splitting the MII, MC expects to see that the MII will have a higher time interest earned of 10 ,4 and a better financial structure (higher current ratio and lower debt-to-equity ratio) would be rated as “high quality” by S&P and Moody's in the market (e.g. Aa for Moody's and AA for S&P). As a result, MII could raise capital/fund more easily and at a lower rate than MC (assume the revolving loan in Table 1 could decline by 1%). This rating improvement would also resolve MC's current constraint and limitation in raising funds in the capital market. Under the plan, the newly raised fund would be used to expand the company's hotel business by purchasing assets of competitors in financial difficulty. However, we do not believe that this business plan with expansion would be accepted by most creditors without an adequate message to the capital market. Since most of the original creditors of MC's bonds were institutional holders who had suffered from the junk bond and real estate market collapse and may also be forced to sell their holdings of MC's bonds at an extremely low price when the MC plan will be implemented (MC bond would be downgraded to non-investment grade due to worsening financial structure). Therefore, most institutional lenders in the market would not be willing to lend money to MII due to the bad reputation resulting from the plan. Furthermore, without the “event covenant” in MC's bond contracts, other bondholders fear that this new plan could lead to large losses for them too in the form of a reduction in the bond market price. Therefore, we believe that, although MC is not limited to the "event covenant", it must convince institutional creditors and other bondholders that the creation of the new entity "MII" is not a simple wealth transfer process, but a financial strategy added value on separating property ownership from service management.