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April 18, 1983, states that petitioner was planning a
massive sale of assets to improve its overall financial
condition. Without such a sale, the Wichita Bank feared
that petitioner would default on its loans before
August 31, 1983.
By mid-April 1983, petitioner's loss estimate for 1983
had increased to between $140 million and $154 million. A
memorandum of the Wichita Bank dated April 25, 1983,
discussing a meeting between representatives of petitioner,
the Wichita Bank, and the Central Bank for Cooperatives,
states that the banks would work to avoid a default, but
“the sale of Terra * * * was certainly more of a temporary
cure than [petitioner] planned in the beginning.” On
May 31, 1983, petitioner’s current ratio was 1.15:1. On
the same date, petitioner's funded debt ratio was 63.8
percent.
At the time of petitioner's 1982-83 financial crisis,
petitioner's stock in Terra was the only asset that could
be sold quickly to pay down debt to the extent required by
the Wichita Bank. In the spring of 1983, petitioner's
management and board of directors concluded that selling
the company's stock in Terra was the only feasible course
of action. The board of directors had never discussed
selling the Terra stock prior to petitioner's financial
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