In February 2012, Wynn Resorts forcibly redeemed 24.5 million of its shares held by Universal Entertainment Corporation in return for a ten-year promissory note (the “Note”) ostensibly equal to the fair market value of the shares. The Note was valued by Wynn Resorts at $1.94 billion and was based upon discounting the future cash flows to be provided by the Note at a 2% annual rate of interest, which was the annual interest rate on the Note.

NERA Affiliated Consultant Dr. Andrew Carron and a team of NERA experts reviewed the valuation of the Note and inputs to that valuation, including the 2% interest rate. Even though the 2% interest rate was specified in the company’s articles of incorporation, Dr. Carron explained that its use resulted in the Note not providing a fair market value equal to its face amount. Dr. Carron examined similar public debt as well as market commentary to explain why the use of a coupon rate of 6% would provide fair market value, assuming all other aspects of the Note were appropriate.

The case settled in early 2018 with Wynn Resorts paying Universal $2.4 billion, which Wynn Resorts described in a press release as the face amount of the Note plus “6% interest over the previous six years” since the 2012 redemption.