Problem $3$

ABE South Dakota, LLC$,$ a Delaware limited liability company $("$Borrower$"),$ was in some financial difficulty and was in violation of a working capital covenant in its debt agreement with a AgCountry Farm Credit Services, PCA, a federal production credit association organized under the Farm Credit Act of $1971,$ as amended $("$Lender$").$

They worked out an agreement that had these statements:

Recitals

Under Section $5\mathrm{.}02$ of the Master Agreement Borrower is required to maintain working capital of at least $$4,000,000$ as of the last day of each month through August $31,2020.$ Borrower's working capital as of the month ending September $30,2019$ was or is anticipated to be less than the required amount, and Borrower has requested Lender's waiver of any Default or Event of Default which has or may arise as a result of such non$-$compliance.

Now therefore,

Limited Waiver of Working Capital Covenant. Lender hereby waives the requirements of Section $5\mathrm{.}02$ of the Master Agreement solely for the period ending on September $30,2019,$ and further waives any Default or Event of Default that has arisen or would otherwise result solely from Borrower's failure to satisfy the Working Capital covenant for such period. The Working Capital covenant for all future periods is not waived by this Agreement and remains in full force and effect.

Here is a balance sheet in millions.

Required:

What is the working capital as the financial statements are described?

What would the working capital be if the Accounts Payable were paid off?

Is the balance sheet in compliance with the covenant either before are after the accounts payable are paid off?

What is the value to the lender of a working capital covenant?

Why would the lender agree to waiving the working capital covenant.