Replies to post #373849 on Elite Pharmaceuticals Inc (ELTP)

[jour_trader]

Doubt he had many options from loan standpoint. They don’t have a long history of CFP, which a bank would want to ensure they get both principal and interest. Banks are extremely risk averse.

[namtae]

Is it possible the CEO has a financial interest or ownership in the bank too? Maybe Mikah Savings & Loan?

Nasrat took out a 12 million dollar loan at 6 percent. I’ll leave alone the fact that he could have gotten a loan for 3 percent just months before.

[no2koolaid]

Here is an answer...

First, let's set the predicate...

On April 2, 2022, the Company entered into a loan and security agreement with East West Bank, pursuant to which the Company was granted by the Bank a termloan of $12,000,000 for a duration of five years and an asset-based Revolving Line of Credit up to $2,000,000. The Company has received the proceeds of $11,959,880 out of the term loan net of applicable professional changes, and it will be used for general working capital purpose. In return for the term loan, the Company is required to meet certain financial terms and conditions.

Nowhere I can see is it mentioned what interest rate was charged and, if assuming it was at the going rate the day it was announced, there are myriad problems with that. The rate would have been locked in sometime before the finalization of the loan, as we know from buying houses. Moreover, the rate would reflect the risks the bank determines from the customer. That it was East West Bank is no small issue. They are a very good bank. Rather than worrying about the interest rate and reporting it inaccurately, what is missed was that Elite was able to get a loan. The whole LPC set of episodes was precisely because Elite had no access to capital. Now they do.