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Paper Topic:

Carlton Polish Company

Carlton Polish Company Carlton Polish Company 1 . Would you recommend the 1 ,365 ,000 loan requested by Charlie Carlton to finance the buy-out of Jim Millers 50 interest Because the current primary challenged faced by the Carlton Polish Company is that of maintaining profitability -- in fact increasing profitability in to gain a greater market share and perhaps make a transition to becoming a publically traded company , the recommendation for the Carlton Polish Company to shoulder an additional debt relative to the proposed buy-out is difficult to make with any conviction

. In taking out what amounts to an extended bridge-loan in to facilitate that transition to a new corporate model and new ownership the Carlton Polish Company will be adding an burden of debt which is inadvisable given its immediate need to expand into new geographical regions and find new distributors while also expanding its range of products

Carlton 's own four-point plan for the company 's future expansion includes the development of new manufacturing facilities for geographical expansion , the possible acquisition of distributors directly by the Carlton Polish company itself , and the possible acquisition of additional companies by Carlton to expand its product range (Carton , 4 . In each of these cases , the presence of a heavy debt burden would prove suppressive to expansion and without a doubt additional debt will be taken on by the company as it pursues any or all of Carlton 's own recommendations

Additionally , while the transition of ownership and the expansion of the Carlton Polish Company do seem , inextricably connected , there is nothing concrete in the corporate history or in the projections for corporate expansion which indicates that the resumption of controlling interest by Charles Carlton would be the most advisable course of action . In fact , given the provision in the loan agreement that "If Carlton were to buy Miller 's share of the company , he would have to arrange for an ly transition of management (Carlton , 6 . The resumption of additional debt on behalf of the Carlton Polish Company during its projected period of transition and expansion is contraindicated

2 . Are the terms and conditions described in Exhibit 5 sufficient ? if not what would you change or add ? The terms and conditions of the loan agreement are very nearly sufficient to facilitate the proposed buy-out of Miller by Carlton however , the extension of the loan over a five year period seems to be a possible vulnerability in the agreement . With interest rate set at 2 plus the prime interest rate (Carlton , 15 ) the possibility for an unforeseen extension of the debt due to a spike in interest rates exists in higher proportion due tot he long extension of the loan . If the Carlton polish Company elected to pursue the Carlton /Miller buy-out as proposed by Carlton and including the loan agreement in question it would be advisable to rearrange the loan-terms to facilitate a shorter term of repayment

The loan agreement also contains the provision that "The company will maintain net...

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