Farmland Industries, Inc. - Page 47




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             be as high as $98.7 million due to unanticipated write-                  
             downs and other factors.  At that level of loss, the                     
             funded debt ratio would have increased to 66.4 percent.                  
             Mr. Knauss also advised officials of the Wichita Bank that               
             petitioner's management had recommended selling a major                  
             asset to reduce debt.                                                    
                  At its meeting of February 1-2, 1983, petitioner's                  
             board of directors accepted Mr. Knauss's recommendation to               
             sell a major asset.  In view of this decision, the Wichita               
             Bank agreed to allow petitioner's funded debt ratio to                   
             remain at 65 percent through August 31, 1983, but insisted               
             that it be reduced to 62 percent by September 1, 1983.  The              
             current ratio requirement was also relaxed for the period                
             ending August 31, 1983, to an absolute working capital                   
             level of $75 million.  Petitioner's current ratio as of                  
             February 28, 1983, was 1.17:1.                                           
                  Petitioner’s projected losses continued to increase                 
             throughout February and March 1983.  An internal memorandum              
             of the Wichita Bank dated March 4, 1983, states that                     
             petitioner “is firmly committed to selling assets to                     
             strengthen [its] operations.”  Another memorandum of the                 
             Wichita Bank prepared on the same day states that                        
             petitioner’s financial problems “exceed the worst case                   
             projections.”  A memorandum of the Wichita Bank dated                    






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