Credit Evaluation School Instructor eBook - Oct 2023

Internal Use Only

Midwest Plastic Products, LLC – Doubtful and Loss • Bank made loan to company in hopes of bringing jobs back to the area. • Hired the manager of the prior business which had closed (see if students pick up on this red flag). • Bank refinanced the M&E note from competitor bank after prior business closed. • Manager Charles Doer’s guaranty provides no support for the business. • Banker drove by the business two weeks ago and found locks on the door and no activity. • Plan is to hire auction company and have M&E sale in next 60 days unless something else happens sooner. M&E values are questionable, but banker thinks the $395M value should be close (so depending on how adamant the banker is, students may choose Substandard). • Have also been in contact with local economic development officials in hopes of marketing the business to another company. People: Business manufactures a variety of plastic products for wholesale and retail business. This business originated in September 2019 with a purchase of M&E from failed Quality Plastics, Inc. Charles A. Doer is the primary owner, signs as a member, and has provided an unlimited guaranty. Mr. Doer was manager and part owner of the now defunct corporation. Bank made loan to company in hopes of bringing jobs back to the area. Purpose: Working capital to buy raw material inventory and term note to purchase and amortize equipment. Proceeds were used to pay off another financial institution and fund purchase of M&E and plastic molds after the prior business closed. Payment: One year revolving note, interest payable quarterly, self-liquidating from sale of inventory. Renewable annually. Loan was fully advanced shortly after the origination date. 4321 – 10 year note, payable monthly. Repayment from business operations. Protection: Both notes are cross-collateralized by a first lien on general business assets. M&E values are questionable, but banker thinks the $395M value should be close (so depending on how adamant the banker is, students may choose Substandard). Have also been in contact with local economic development officials in hopes of marketing the business to another company. Figure that the $40M in raw material inventory is gone, so need to charge-off. Performance: Banker drove by the business two weeks ago and found locks on the door and no activity. Plan is to hire an auction company and have M&E sale in next 60 days unless something else happens sooner. See if the students also note that they need to charge off the accrued interest. • Figure that the $40M in raw material inventory is gone, so need to charge-off. • See if the students also note that they need to charge off the accrued interest.