Question
Hinkley Chemical Company (Hinkley Chemical) is a large multi-national business engaged in the manufacture and sale of chemical solvents. Hinkley formed a subsidiary, Hinkley Chemical
Hinkley Chemical Company ("Hinkley Chemical") is a large multi-national business engaged in the manufacture and sale of chemical solvents. Hinkley formed a subsidiary, Hinkley Chemical Solvents Inc. ("Solvents") to act as a distributor of the products it manufactures. As the sole shareholder of Solvent, Hinkley Chemical appointed all of the members of Solvent's Board of Directors. Hinkley Chemical sold its chemical solvents and products to Solvent, which then resold the chemical products. Solvent obtained substantial financing from the First National Bank of Lindenwood to finance the purchase of its inventory from Hinkley Chemical. Solvent regularly transfers almost all of its profits from the resale of the chemical products to Hinkley Chemical under a "license agreement", leaving very little capital in its possession. Solvent later defaults on its $30,000,000 revolving loan with theFirst National Bank of Lindenwood and later files for bankruptcy. Having no chance of recovering any of the $30,000,000 outstanding indebtedess from Solvent, the First National Bank of Lindenwood sues Hinkley Chemical for the balance owed on Solvent's loan. What are the bank's prospects of recovering the loan balance from Hinkley Chemical? Explain.
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