Laidlaw Transportation, Inc. and Subsidiaries - Page 63

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          year terms for leveraged buyouts.  We are not convinced by that             
          testimony.  First, petitioners' commercial loans during the years           
          in issue were generally for 5 years.  Second, leveraged buyouts             
          typically require the borrower to provide a security interest in            
          its assets, and are subject to financial covenants which impose             
          severe restrictions unlike the LIIBV advances.                              
               This factor supports treating the LIIBV advances to                    
          petitioners as equity.                                                      
               4.   Whether the Provider of the Funds Has the Right to                
                    Enforce Payment of Principal and Interest                         
               A definite obligation to repay an advance suggests that the            
          advance is a loan.  Estate of Mixon v. United States, supra; see            
          Campbell v. Carter Found. Prod. Co., 322 F.2d 827, 832 (5th Cir.            
          1963).  The documents evidencing the LIIBV advances showed that             
          LIIBV had a right to enforce payment of principal and interest.             
          Petitioners contend that these loan agreements are significant              
          because they were legally binding.  We disagree because LIIBV and           
          petitioners did not enforce any of the loan agreements.  The fact           
          that the agreements may have been legally binding counts for                
          little if, as here, the parties understood that they would never            
          be enforced.  As discussed at par. II-D-3, above, the right to              
          enforce payment may be meaningless if the parties do not expect             
          the recipient to repay.                                                     
               This factor supports treating the LIIBV advances to                    
          petitioners as equity.                                                      






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