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Hampden

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Hampton Machine Tool Company (HMTC) is a machine tool manufacturing business whichstarted in 1915 and has been a stable company since its establishment. The company’srevenues rely heavily on military aircraft and automobile manufacturers within the St. Louisvicinity.During 1960’s until end of 1970’s, HMTC experienced highs and lows which were mainly due toincreases and decreases in production. This is influenced by the Vietnam war, economicconditions, expansion of export market and demise of competitors. Though adversecircumstances happened, HMTC has successfully survived these problems. This can beattributed to the company’s conservative financial policies.In December 1978, Benjamin Cowins, President of HMTC, requested a 1M USD loan to St.Louis National Bank to purchase stocks of several dissident shareholders. The interest rate for the loan was 1.5% to be paid monthly and the principal of the loan is to be paid on September 1979. Mr. Jerry Eckwood, Vice President of St. Louis National Bank allowed the loan requestbecause of three reasons: 1) HMTC’s submission of projected sales and forecasted financialstatements; 2) HMTC’s credibility as depositor in St. Louis Bank and 3) Mr. Cowins’ credibility inthe business community. However, in September 1979, Mr. Eckwood received a letter fromHMTC requesting to extend repayment of the loan to December 1979 and a further loan requestof 350,000USD for equipment purchases.
Point of View and Problem Definition
The point of view to be taken in this case will be as Jerry Eckwood, a creditor. As a creditor,aside from the financial ratios, one of the most important things to be looked at for a possibleborrower is whether they could repay their loan upon the date of the loan’s maturity. As such,the main problem for this case is: Should Mr. Eckwood accept Mr. Cowin’s proposal regardingthe extension of the original loan and an

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