Penn Warranty Corporation sold guarantee contracts to the used car market that is growing by 11% as forecasted. During the downturn in 2008/2009, Penn's sales fell by 26%. Additionally, disturbances in financial and insurance markets created a cash shortfall. Under its loan agreements, Penn was facing the odds of default and potential foreclosure in the summer of 2009.
Its lender was refusing to waive covenants unless the company paid down $1 million of its outstanding debt of $7.75 million. The only source for this type of refinancing was the equity investors who financed buy out of purchase of the business eighteen months before.
Publication Date: 08/11/2011
This is just an excerpt. This case is about Finance
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