- 7 - securities operation had a negative effect on Drexel’s financial position during 1989. Drexel, however, continued to engage in business throughout 1989 and into 1990. Drexel responded to the difficulties facing it by (1) increasing efforts to reduce its securities positions, especially in high-yield securities and bridge loans, (2) pursuing alternative sources of financing, and (3) developing and considering different strategic options for its lines of business. Drexel developed a 1990 business plan that projected significant cuts in operating costs, which were in addition to a large reduction of expenses in 1989 from 1988 levels. Drexel also completed a series of management changes that were designed to provide new leadership in key business areas. Despite the adverse developments affecting Drexel, it projected a profit for 1990. During January 1990, Drexel’s cash flow from operations was depressed, and Drexel experienced continuing difficulties in financing its operations, relying upon the assets of subsidiaries to fund shortfalls. Drexel also sought new sources of financing to replace its commercial paper, which was unattractive to buyers because of a lowered rating. Although Drexel believed that it could utilize the excess net regulatory capital of its subsidiaries to finance its operations, it was informed by the SEC on February 7, 1990, that it could not borrow any of the subsidiaries' funds without prior SEC approval. Although the SEC agreed to permit Drexel to borrow funds from a subsidiary to payPage: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
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