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meeting to forgive $5 million of the advances to Kenilworth.2
The C.P.A. had discussed with the Board whether all of the
advances to Kenilworth were worthless, and he had queried whether
petitioner could forgive the entire amount as a bad debt. The
Board concluded conservatively that the uncollectible advances
totaled $5 million. The Board believed that Kenilworth could not
repay this amount because it had a negative net worth as of
February 28, 1988, and Bear Stearns had canceled most (if not
all) of Kenilworth's LPO's on October 19, 1987. The Board also
considered the composition of Kenilworth's assets, as well as
certain claims that it could make in regard to its trading
activities and the likelihood of success with respect thereto.
2 Petitioner's minutes for this meeting state as follows:
During the fiscal year ended February 28, 1988
through the normal course of its business activities,
American Underwriters, Inc. has loaned the sum of
$18,096,100.00 (Eighteen Million Ninety Six Thousand
and One Hundred Dollars) to Kenilworth Corporation,
Inc.
As a result of the sharp downturn in the equities
market during the month of October, 1987, Kenilworth
Corporation, Inc. incurred extreme financial losses
that strained its liquidity to the point of questioning
its ability to continue its business operations as a
viable going concern. In consideration of the above
circumstances, American Underwriters, Inc. and
Kenilworth Corporation Inc., formally agree to a
partial relief of the debt obligation owed by
Kenilworth Corporation, Inc. to American Underwriters,
Inc. for the amount of $5,000,000.00 (Five Million
Dollars).
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