- 38 -
Wichita Bank were the largest in the national Farm Credit
System. As of August 31, 1982, petitioner's consolidated
loans from the Wichita Bank and commercial banks totaled
over $500 million. As of the same date, petitioner's
outstanding subordinated debt certificates had reached an
all-time high of approximately $428 million.
Prior to 1982, petitioner's loan agreements with the
Wichita Bank contained covenants designed to ensure
petitioner's continued solvency. Under these covenants,
petitioner was required to maintain a funded debt ratio
(subordinated debt instruments divided by total
capitalization) of no more than 65 percent. Petitioner was
also required to maintain a current ratio (current assets
to current liabilities) of at least 1.15:1. In late 1981,
the Wichita Bank took the position that more conservative
ratios were necessary to ensure petitioner's financial
stability. In a loan agreement effective February 15,
1982, petitioner agreed that by August 31, 1982, its funded
debt ratio would not exceed 62.5 percent, and that its
current ratio would be at least 1.20:1.
Shortly after adopting its budget for the 1982 fiscal
year, which projected lower operating savings than had been
realized in 1981, petitioner requested that the funded debt
ratio agreed upon in the February 15, 1982, loan agreement
Page: Previous 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 NextLast modified: May 25, 2011