Pacific Holdings is a diversified conglomerate that has rapidly expanded over the past five years. In 2004, the company reported earnings of $2BN, with net income of $850MM and a market capitalization of $4.5BN. Pacific has various subsidiaries that operate in a range of sectors including health services, leasing, and tubing, among others. The holding company needs a $2BN revolving credit line, which will be used to provide working capital for its various operating subsidiaries. Pacific has pledged the equity stock in each of the operating subsidiaries from which it states that repayment will also be derived from the dividends that Analyzing the Transaction: What are the Lending Objectives 67 are upstreamed to the holding firm. Prior relationship with the borrower has been good, but limited to only hedging products for swaps and foreign exchange. Although the corporate structure of the holding company has always been obscure, you notice in your credit assessment that Pacific Holdings derives all of its revenues from the operating divisions. Would you extend or decline the preliminary loan approval?

Answer rating: 100% (QA)

Based on the information provided it is difficult to make a definitive decision on whether to extend or decline the preliminary loan approval for Paci... View the full answer