- 11 -
of $100,357,000, including $43,859,000 owed to the bank group.
Beginning in 1982, CDC was unable to meet its scheduled principal
and interest payments to the bank group. On December 31, 1982,
CDC was highly leveraged with a debt-equity ratio in excess of 9
to 1.
CDC's financial difficulties increased in 1982 as the demand
for drilling dropped. During 1982 and 1983, CDC canceled
purchases, ceased construction of additional drilling rigs, and
commenced negotiations with its lenders. The decrease in CDC's
cash-flow from drilling operations impeded its ability to service
or refinance its bank loans, which in July 1982 totaled
approximately $85 million in principal. CDC found it necessary
to restructure its financing arrangements with the bank group and
executed a restated loan agreement dated February 1, 1983.
In April 1983, due to cash-flow difficulties, CDC stopped
making the monthly payments required under its sale and leaseback
financing arrangement with Greyhound. It then attempted to
restructure the terms of the Greyhound agreement. On August 30,
1983, after these attempts failed, CDC agreed to a voluntary
repossession of two rigs by Greyhound.
On August 1, 1983, CIT Corp. (CIT), one of CDC's equipment
lenders, foreclosed on certain equipment. CDC had defaulted on
its notes to CIT in the total amount of $381,096.
By September 6, 1983, CDC realized that, because of cash-
flow problems, it could not meet its October 1983 interest
payment to the bank group under the restated loan agreement.
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