Agenda Packets - 1986/10/13 - Laserfiche WebLink

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ing capacity by a letter from Phillip Hogue, President, �. Investment Banking of Daniels & Associates, Inc. and a let- ter from the First Bank of Boston which conclude that North Central should have available additional borrowing capacity far in excess of its cash requirements. Second, North Central management has obtained confirmation that the financial ratios used to test the compliance of North Central's borrowings from First Boston are in fact applied a year later than that discussed in Mr. Cattoor's September 11, 1986 memorandum. To date, the financial analysis has revealed the foll:wing: II. RATIOS Based upon North Central's response regarding the financial ratios test as it pertains to the First Bank of Boston loan commitment, there is still ambiguity as to when the finan- cial tests are applied. As indicated in the Bank of Boston letter, "if the closing were to occur on or about January 1, 1987, no tests would be applicable in 1987, and the first year of the tests would be 1988." It appears that there is still a possibility that the financial tests could be applied on January 1, 1988. However, our concern with the ratio issue is based on the pro formas presented by North Central. As stated earlier, the assumptions of the pro formas we have received have not -. been challenged in our analysis. A modification of the assumptions in such areas as interest rates, penetrations, cash flow, etc., could effect the ratio question. The Bank of Boston has informed Mr. Cattoor that they reviewed other pro formas from their own sensitivity analysis and have made a loan commitment based upon all of the information they had available to them. Therefore, it is our conclusion that the ratio question is irrelevaat to any further analysis of the transfer in that our concern was based upon one set of pro formas which have been discredited. III. ECONOMIC VIABILITY OF FINANCIAL PLAN With the objective of determining whether the financial plan as presented to the Commission is viable, it is concluded that the pro formas do not support an economically viable plan. North Central has indicated to the Commission that their borrowing plan as presented is dependent• upon addi- tional borrowings if the pro formas did in fact become reality. North Central has indicated that they have borrow- ing capacity of approximately 5.5 times the operating cash flow being generated from their systems. As it relates to industry standards North Central's claim regarding their - 3 -