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borrower or guarantor to obtain legal opinions concerning
enforceability of the guaranty. The agreement did not require a
covenant that the guaranty would rank no lower than that of all
unsecured indebtedness of the guarantor. The agreement required
Transit to provide financial information concerning the guarantor
only when requested. On April 23, 1986, Transit and LTI as
guarantor amended the February 4, 1986, loan agreement with LIIBV
to increase the line of credit to $100 million and amended the
interest rate provisions from a variable rate equal to the prime
interest rate of the ABN Bank, New York, to a variable rate equal
to the lower of the prime interest rate of the ABN Bank, New
York, and the 60 day LIBOR interest rate plus � percent.
Also on April 23, 1986, LWSI and LII as guarantor signed a
loan agreement with LIIBV for $50 million. The terms were
similar to the Transit agreement, as amended, but LWSI agreed to
limit its debt to equity ratio to no more than 2.5 to 1.
On May 26, 1986, before the May 31, 1986, interest payment
date, LIIBV amended its loan agreements with Transit and LWSI to
modify the interest rates.
On August 6, 1986, LIIBV advanced $54 million to Transit for
which Transit signed a demand note.
The loans to which LIIBV and petitioners agreed before
September 1, 1986, did not require the borrowers to make periodic
principal payments. The agreements permitted Transit and LWSI to
convert the agreements to term loans on or before the maturity
date. All of the pre-September 1986 LIIBV loans were payable on
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