A Short Term Cash Flow Essay

958 Words4 Pages
Resort. Co had uncollateralized term loans (Original Debt) with Bank A of $129.6 million and Bank B of $302.4 million that totals $432 million as of December 31, 2010. There were also unamortized issuance costs of $3 million ($900,000 for Bank A and $2.1 million for Bank B). The maturity date of the Original Debt is December 31, 2020. Because of lower than expected travel during the holiday season, Resort. Co projected a short-term cash flow shortage and would not be able to meet the short term requirements of the Original Debt. In addition, Resort Co. was in default on another debt with Bank C that resulted in cross defaults with both Bank A and Bank B.

As a result of the shortage of cash flow, Resort Co. restructured and amended the Original Debt with Bank A and Bank B. Highlights include new interest terms from 5 percent to 6 percent, no more annual payments of principal and interest, and the same maturity date as originally stated. The amended original debt (Modified Debt) no longer requires periodic payments of principal and interest; instead all interest and principal is due at maturity. Additionally, with the modification of the Original Debt, Bank B offered Resort Co. a new $15 million term loan (New Term Loan) that is due on December 31, 2020 with the same interest and payment terms as the modified debt. The proceeds from this loan were used to pay for fees to Bank A and expenses incurred by third parties, pay for the principal paydown of the Original Debt held by
Get Access