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after Swirl ended the Bill Tice agreement, Swirl introduced the
Oscar de la Renta product line under a business plan it designed
to eliminate the losses.
D. Swirl's Line of Credit With Chemical Bank
In the mid-1980's, Swirl had a $3.8 million line of credit
with Chemical Bank which was secured by Swirl's trade accounts
receivable, machinery and equipment. Swirl had borrowed $3.3
million against its line of credit by January 1986.
In January 1986, Chemical Bank became unhappy with Swirl as
a customer. Chemical Bank believed that Swirl was not meeting
the standards Chemical Bank set for its borrowers. Chemical Bank
froze Swirl's line of credit in January 1986. At that time,
Swirl had serious financial difficulties and needed the line of
credit for working capital. Lack of working capital precluded
Swirl from buying enough raw materials and filling orders.
Swirl began to lose money.
Chemical Bank told Swirl in March 1986 that it no longer
wanted to have Swirl as a customer and wanted another lender to
assume the $3.3 million line of credit.
Chemical Bank had a workout division which handled loans it
made to companies that were financially troubled. The workout
division tried to maximize Chemical Bank's recovery on loans by
liquidating the loans or by taking other steps. The workout
division generally did not help borrowers find new financing; it
concentrated on trying to get borrowers to repay the loans.
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