Padgett case for FINAL

Padgett case for FINAL - Case#8 Padgett Paper Products...

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Case #8: Padgett Paper Products Company Francis Libris: VP of of the Caslon Trust Company of Richmond, Virginia, one of Virginia’s largest banks. Subject to criticism by his superiors for failing to deliver on his commitment to manage and structure the relationship properly. Responsible for the Broad Street Commercial Lending Center of the bank, to which Padgett’s account was assigned because its small executive offices were on an upper floor of the same building in which the center was located. Padgett established account with the bank in 1947. Even the acquisition of several small companies in the 1980s did not require high levels of debt. 1996 brought Padgett suddenly to the bank, asking for an additional $3.6 million loan. Combined with the $3.6 million already outstanding at that time, Caslon’s total exposure could rise to $7.2 million, well in excess of the $5 million advised credit line that had been approved for the company. The request was granted, nevertheless, under an internal guidance line of $8 million, and the rate was continued at prime. Fiscal year ends on April 30. Libris tried to persuade Padgett’s management to finance part of the company’s requirements in the form of long-term debt from a life insurance company. When the financial VP declined the private-placement proposal, Libris decided to see how the loan could be repaid to the bank within the period initially suggested by his superiors. Padgett Paper Products Company Padgett Paper Products Company, a closely held but publicly traded (over-the- counter) company manufactured a variety of stationary products including notebooks, loose-leaf binders, forms, and filler paper for students and record- keeping purposes. Over 100 yrs old.
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Management was primarily professional, appeared competent, responsible, and reasonably effective. Expertise largely on operations, which were carried on at several plants in the Midsouth, and in marketing, which was controlled out of the executive office in Richmond. Management was not financially oriented, Libris had observed. Padgett’s customers were some 5,000 wholesalers and retailers in the United States and Canada. No single customer or small group of customers accounted for a substantial share of Padgett’s sales. Terms were 2/10 net 30, but few customers took the discount. Many stretched payment for an additional 30 days.
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Padgett case for FINAL - Case#8 Padgett Paper Products...

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