Credit & Lending Assignment
Question 1 -
You've been introduced to Rhodes Haulage Ltd by a referral source that you've been cultivating for some time with a view to generating new business for your Bank. This is a local transportation company which has been trading for over 20 years. The directors are Laurie Rhodes and his brother Van Rhodes, both of whom are in their late 40's.
Just under two years ago, they met with their existing Bank who sanctioned an increase in their overdraft facility to £300,000. The Bank already held a Standard Security over the business premises and a Bond & Floating Charge from the company. At the time the Directors also provided a Joint & Several Personal Guarantee for £60,000. The Bank agreed that if the business generated the anticipated level of profitability, they would look to release the Directors from their guarantee obligation once 12 months had elapsed.
Last week the Directors arranged a meeting with their Bank and were introduced to their recently appointed new relationship manager. At this meeting they requested a further increase in their overdraft facility to £460,000 for a 6 month period, thereafter reducing to the current level of £300,000. They provided the undernoted up to date accounting information in support of their application.
The Bank reviewed these figures and advised that they were unwilling to increase their support to this level. They expressed the view that the business seemed to be overtrading. Further negotiations followed and the Bank eventually offered to provide a facility of £350,000 subject to a review in 6 months. However, this was conditional upon a commensurate increase in the Directors' guarantee as opposed to the earlier consideration of releasing the guarantors from their liability.
The Directors have been with their existing Bank since they incorporated the company and they are extremely unhappy with this assessment of their position. They are now looking to consider alternative banking arrangements.
As their potential new Banker, you are required to critically evaluate the proposal.
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RHODES HAULAGE LTD Balance Sheet
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£'000's
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£'000's
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£'000's
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2013
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2014
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2015
|
|
Assets
|
|
|
|
|
Debtors
|
400
|
580
|
680
|
|
Stock
|
12
|
20
|
24
|
|
Directors Loans
|
6
|
28
|
52
|
|
Vehicles
|
494
|
594
|
702
|
|
Fixtures & Fittings
|
16
|
16
|
16
|
|
Premises
|
160
|
160
|
160
|
|
1088
|
1398
|
1634
|
|
|
|
|
|
Liabilities
|
|
|
|
|
Capital
|
60
|
60
|
60
|
|
Profit & Loss Account
|
144
|
204
|
244
|
|
Bank Overdraft
|
72
|
154
|
284
|
|
Creditors
|
292
|
390
|
344
|
|
Taxation
|
44
|
24
|
46
|
|
Leasing
|
372
|
470
|
570
|
|
Bank Loan
|
104
|
96
|
86
|
|
1088
|
1398
|
1634
|
|
|
|
|
|
Sales
|
2600
|
2800
|
3000
|
|
Directors Remuneration
|
110
|
130
|
150
|
|
Net Profit
|
60
|
60
|
40
|
Question 2 -
a) Appraise the role of an Administrator.
b) Critically discuss the position of a franchisee.
Question 3 -
Assess and evaluate the key elements of Market / Industry risk assessment.
Question 4 -
ABC Foods (Nigeria) Group is based in Lagos and specialises in the packaging and distribution of food related products. In recent years, the business has shown steady growth and is regarded as financially stable. While the business has developed in its domestic market, the management team are ambitious and have identified export opportunities in both Europe and North America. They have asked that you appraise them of the type of facilities that could be made available in support of any foreign business transactions.
Question 5 -
Your Bank is running an intensive training programme for its recently recruited graduate employees. You've been requested to address the group and provide a short but comprehensive session on "Trusts". Review and evaluate the content of your presentation.