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investment banks' proposals and use funds from LIIBV to pay for
GSX.
LTL assigned its rights and obligations under the GSX
purchase agreement to LWSI before the closing date. LTL and LTI
recorded the transaction on their books as an intercompany
receivable owed to LTL by LTI. LTI recorded the transaction as
an intercompany receivable owed by LWSI.
LTL borrowed $349,812,613 from TDB on September 30, 1986,
and on October 10, 1986, deposited it in a GSX purchase escrow
account. In a document entitled "Loan Agreement" signed by
Cairns and dated as of September 30, 1986, LTL agreed to many
conditions for the loan that typically accompany commercial
loans, including not to allow its ratio of current assets to
current liabilities to be less than 1 to 1, its debt to equity
ratio13 to be greater than 2.5 to 1, its cash-flow ratio14 to be
less than 1.25 to 1, and its net worth to be less than C$325
million.
On October 10, 1986, LWSI wrote promissory notes payable to
LTI on demand for $124,812,613, $125 million, and $100 million (a
total of $349,812,613). Each promissory note required LWSI to
13 Debt to equity ratio is computed by dividing the debt of
a company by its shareholders' equity. The ratio indicates the
level of financing that is provided by the company's shareholders
and its creditors.
14 Cash-flow ratio is computed by dividing cash-flow by
anticipated debt payments.
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