Hampton Machine Tool Company

They may have to do that since the company's predicament indicates partly that "the bank doesn't understand Be Our Guest's business"�. Exhibit 2 shows a list of what the company cannot do in terms of the loans it has with State Street. All of these covenants, like prohibiting two consecutive quarters of net losses and not incur a net loss for any fiscal year, suggest further that Be Our Guest may need to find another lender who will not be as strict with its terms.�

1. Was Borg-Warner’s Industrial Products Group a good candidate for a leveraged buyout in 1987? Evaluate the price paid and the structure of the deal that closed in May 1987. Are you optimistic about BW/IP’s prospects?

Management considering share repurchase program should weigh its benefit of financial discipline, efficient corporate strategy implementation and utilization of tax shield against the downside of cost of financial distress. It’s not the possibility of bankruptcy that causes concerns among equity holders regarding extent of leverage but the direct costs (legal, liquidation, administrative etc.) and indirect costs (deteriorated corporate image, management time and attention, agency costs of value-destructing investment, distress asset sales etc.). Exhibit 4 lists the key assumption inputs of approximating quantitative firm value/ equity value accretion. Levering UST to a larger extent by adding $1,000m does increase firm value.

Why can't a profitable firm like Hampton repay its loan on time and why does it need

The U.S. Bank loan approval board recommends that U.S. bank allocate the $6.5 million dollar loan to Redhook. Redhook has been a valued customer of the bank for a couple years now never faulting on any payments. Due to the fact that they have missed past payments and by looking at the past financial performance of the company shows that they have capability to

There are two chief participants in this case study, Paul Mackay and Jackie Patrick. Mackay, a sole proprietor of Lawsons (a general merchandising retail site in Riverdale, Ontario), has approached the Commercial Bank of Ontario in order to acquire an additional $194, 000 bank loan and a $26,000 line of Credit. Patrick, a first time loans officer, has been appointed to Mackay’s request. As such

The idea of repurchasing shares was no stranger to Bill Marriott by January 1980. Almost five million shares of common stock had been repurchased on the open market by Marriott Corporation during 1979 at a total cost of $74 million and an average price of $15.16 in the belief that they were undervalued—a belief that still was not fully reflected in the market price. At $19 5/8, the stock was selling at only six times cash flow per share; and its price/earnings ratio of nine was a far cry from historical multiples as high as fifty times as recently as 1973. Its low price seemed to offer once again an obvious opportunity to benefit shareholders. However,

The main concern is that the company would have a lot of debt if they have to borrow money from the bank, continue to pay Charlie Carlton’s parents, and pay off the $1 million debt to Mr. Miller.

United States, the courts look at whether there was an identity of interest between creditors and shareholders and the timing of the advances during the corporation’s organization. They test for a debtor-creditor relationship based off a enforceable obligation to pay a fixed amount of money. They look at the motivation of the taxpayer to see if the advances were made for ulterior tax purposes. If repayment was contingent upon the success of the company advances were made toward, it would be more than likely considered equity than loans. This case also adds that because no promises were made to repay at a fixed interest rate or certain time, and did not pay interest and gave no security for the advances made, the case sees the taxpayers as the sole shareholders gaining equity in the

Mr. Paul Mackay, a sole proprietor, has approached the Commercial Bank of Ontario in order to obtain an additional $194,000 bank loan and a $26,000 line of credit. Paul owns and operates a general merchandising retailer in Riverdale, Ontario named Lawsons’. The bank loan is needed for Mr. Mackay to reduce his trade debt that has a sheer 13.5 per cent interest penalty. The line of credit is needed for sales seasonal downfalls so that Mr. Mackay could properly manage those tough months. Jackie Patrick, a first time loans officer, has been appointed to Mr. Mackay’s request. Although anxious to finish her first loan, Ms. Patrick knows that this particular case is a difficult one.

When Miller considered Chang’s Clinic to be an opportunity, he desired to research the ability in obtain a loan so he could pursue the American dream. It is loyalty that keeps the dental business alive and growing and Despite Miller being the new guy telling clients to say ah, he anticipated he would grow substantially (50% of 04-05) within the first year. After reading this assumption it immediately told me he’s confident in obtaining the loyalty of Chang’s clients. I’m not a dentist, but I assumed this loyalty was imperative to survival and makes this business profitable. After reviewing the income statement and balance sheet provided, that was determined to be a fair assumption. Chang acquired this

Second, Massey had an enormous amount of debt outstanding with more than 100 banks around the world which resulted in numerous covenants related to these loans. These covenants hindered Massey’s free access to the capital market. Hence, Massey couldn’t attract equity to finance the company and was dependent on loans. Finally, most of the borrowing from banks was unsecured. Because of the higher risk of unsecured debt, the loans were more expensive. That is, unsecured debt leads to higher interest rates. Thus this was also a reason for high costs of debt.

The equity investment at risk in this case doesn’t include the equity from ElectricCo because it is financed by AutoCo, a party related to the entity. In addition, the 70% debt financing is guaranteed by AutoCo. The bank is not willing to provide

WEP’s is requesting a 3-year, $10,000 loan for start-up costs that Ward’s contribution is unable to cover. Ward has approximately $8,000 in collateral available to secure the loan.

Nowadays, every business needs finance. But at the same time, bad debt has become a stinging problem for the creditors. Many companies are faced with the high credit risk, so obtaining it can be one of the most difficult parts of running your business.