- 77 -
Indus. Park v. United States, 561 F.2d at 581; Jewell Ridge Coal
Corp. v. Commissioner, 318 F.2d 695, 698 (4th Cir. 1963), affg.
T.C. Memo. 1962-194. Rademacher's position would subject the
creditor to undue risk.
Jacobs testified that it would have been possible for
petitioners to get large loans. However, he said that loans this
size would require security because petitioners were highly
leveraged. He cited examples of large bank loans made to highly-
leveraged companies during the years in issue. However, those
examples are not compelling here because those loans were to
companies that were much larger than petitioners, and they
included various security arrangements including guaranties, as
here. Jacobs concluded that it was not clear that LTI and LII
could have borrowed as much from commercial banks as they
received from LIIBV. He said they might have been able to borrow
large amounts if they first had a public offering of subordinated
debt.
Petitioners contend that Enger testified that petitioners
could have obtained bank financing in the amounts that LIIBV
advanced to petitioners. We disagree. Enger testified that
petitioners could not obtain bank financing from commercial
lenders on terms comparable to the LIIBV agreements, and could
obtain financing only by using equity and subordinated and senior
indebtedness.
Petitioners contend that the three investment bankers'
proposals show that they could have reasonably obtained
Page: Previous 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 NextLast modified: May 25, 2011