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<br />N'oIr�th Centraill was an additional, $8,65 miollion. of senior debt
<br />financing that wo�u,ld be, obtained in the year 1992. A.review
<br />of the Re ,esit For Information indicated the existenice, of no
<br />financling commitments that would covierl the $2,.9 million
<br />shortage in cumulative cash flow nor the $8.5 million of
<br />41 10 0
<br />add o.tionall, senl or debt, financing (total clash shortage of
<br />$11.4 million) I.
<br />Second,, a revii,ew if the loan commitment letter from the Bank
<br />oif Boston for the $50 million, seniorl debt 'investment calls
<br />for certaiin finanC,Ial rat1 evil tests tio be met "in order Eor
<br />North Center, to maintain it,s loan balance with the Bank of
<br />Bositon.1 The loan commitment letter, indicates that the total
<br />debit to operating cash flowl ratio, in each of the years one
<br />a .91
<br />and two must be, no higner than 61.5 to 1 and 5,.75 to 1.
<br />respectivel I y al In performing these, calculations on North
<br />Central'' pro formas "included in the Request For Informa-
<br />JI 0 VI
<br />tion, i t is, mated that rla,tios, of 01 to 1 in year one and
<br />51*87 tol 1, in year two exi,st,.l This, 1",nd,i,cates, based upon the,
<br />pro, formaspi that in year one and two Noirth Central will not
<br />be in compliance with the, loan, commitment with the Bank, of
<br />B,ol s, t ol n,, Add it ionallyf the operating cia,sh flow to debt ser.
<br />al -
<br />vi ce ratio "is also, not met, *in year l one when the ratio IS
<br />required to, be at least 1.1 to 1A,. North Central's ratio
<br />o operating cash flow to debt service 'in year one is 1,.07
<br />di 151
<br />to 1. This indicaites,,oi againri that North Central would not
<br />ft 0,
<br />be in compiiance based upon our understanding of the finan-
<br />cial test as, described in the Bank of Boston loan commitment
<br />l,e t, t l e i .1
<br />0 0
<br />It should be understood by the Commission, that the above
<br />coincier'ns result in the conclusion that the financial pro
<br />formes as, presented by North Central do, not represent an
<br />economically viable plan To this previous coniclusion, Mr.
<br />Hauser took exception based on 'insufficient communi"cation of
<br />North Cent ralls futu,re borrowing capacity to meet the per-
<br />ceived revenue shortfalls and an alleged misappiication of
<br />the Bank of' Boa ton financial rat iosel The Commission subse-
<br />quently continued the public hearing and, directed its staff
<br />to, further investigate North Central's claims,, The follow-
<br />qI a investigation 0,
<br />-
<br />inc is a, siumma,ry of our investigation las determined through
<br />direct conversations, with North Central management and fur -
<br />,01
<br />ther documentation supplied by N'olrth Central,
<br />First., in response to the September lif 1986 memorandum,
<br />A
<br />concluding that the, financial pr-o flormas, as presented do not
<br />it
<br />represent an economically viable pl,l,anf North Central maniage-
<br />ment has taken the position that despite the pro formers
<br />i
<br />411 nd,icating cash shortfa,llsir significant borrowing abi lity
<br />will, exist in the future based upon the level of operating
<br />cia,sh flows gIeineirat,ed from the systems. , 'North Central has
<br />attempted t,o demonstrate and con. -irm the additional borrow -I
<br />
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