Why Was the Company's 1998 Covenant Violation So Worrisome?

d. Why was the company's 1998 covenant violation so worrisome?

Answer: From 10K balance sheet the cash and cash equivalents in 1998 was cut into merely half compare to the 1997. The reduction in cash induces worry about company's liquidity and causes company to borrow more money to build cash. However lenders will ask higher interest rate in the given situation. Following caused the troublesome covenant violation in 1998.

* Board of directors authorized the repurchase of up to 1.9M shares on the open market as a show of good faith to the market.

* Middleby also wrote off a failed $1M enterprise resource planning system implementation and restructured its international operations at a cost of $500,000.

Above mentioned moves triggered violation of debt-to-EBITDA and fixed-charge coverage covenants on its $20M multi-currency revolving credit line and $15M senior unsecured note.

d. Why was the company's 1998 covenant violation so worrisome?

Answer: From 10K balance sheet the cash and cash equivalents in 1998 was cut into merely half compare to the 1997. The reduction in cash induces worry about company's liquidity and causes company to borrow more money to build cash. However lenders will ask higher interest rate in the given situation. Following caused the troublesome covenant violation in 1998.

* Board of directors authorized the repurchase of up to 1.9M shares on the open market as a show of good faith to the market.

* Middleby also wrote off a failed $1M enterprise resource planning system implementation and restructured its international operations at a cost of $500,000.

Above mentioned moves triggered violation of debt-to-EBITDA and fixed-charge coverage covenants on its $20M multi-currency revolving credit line and $15M senior unsecured note.

d. Why was the company's 1998 covenant violation so worrisome?

Answer: From 10K balance sheet the cash and cash equivalents in 1998 was cut into merely half compare to the 1997. The reduction in cash induces worry about company's liquidity and causes company to borrow more money to build cash. However lenders will ask higher interest rate in the given situation. Following caused the troublesome covenant violation in 1998.

* Board of directors authorized the repurchase of up to 1.9M shares on the open market as a show of good faith to the market.

* Middleby also wrote off a failed $1M enterprise resource planning system implementation and restructured its international operations at a cost of $500,000.

Above mentioned moves triggered violation of debt-to-EBITDA and fixed-charge coverage covenants on its $20M multi-currency revolving credit line and $15M senior unsecured note.