Carlson Trust Company of Richmond, Virginia has a long-term banking relationship with Padgett Paper Product's Inc. Historically Padgett has performed more or less seasonal transactions with Carlson Trust, smaller short-term loans and tax payments. But, as a result of inflation and a recent acquisition of a competitor (Tri-State Tablet Company), Padgett Paper Products, Inc's financial needs have risen to a permanent level rather than being merely seasonal in nature. Management (Libris) at the company's bank must revise Padgett's debt structure in a mutually satisfactory manner.
Because Libris was on a deadline to reflect the new debt structure on ?the books? I feel that he rushed his preliminary ?fancy agreements?to Padgett, nearly compromising the entire relationship just to save embarrassment with his superiors. Once settled though, he took a closer look at Padgett's business and its entities and prepared a new set of forecasts for Padgett's books, thus regaining the trust Padgett once had with the bank. In addition, Padgett noted a savings of $1.2 million could be had in the coming fiscal year. Now, Libris needs to come up with a loan structure in this competitive and volatile market.
Taking the current economic environment into account, along with the double exposure of debt that Padgett had taken on, I don't see how the bank can justify the additional line of credit or the restructuring of the loan on a more orderly basis. It seems as though the management team of Padgett doesn't really want to grow as a firm. Typically, growth firms will lack a dividend payment in favor of growing the firm operationally by acquisitions. With the past acquisitions (minor), it seems as though they want to keep pace with the grow ...