Hampton Tool Machine

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Hampton Tool Machine

I. Summary Hampton Machine Tool Company was established in 1915, whose customers were aircraft and automobile manufacturers located in the St. Louis area. The company had a large success rate throughout the 1960’s, with an unfortunate decline throughout the mid 1970’s in sales. The company was able to recover in the years following due to a large increase in military aircraft sales, especially the company’s conservative financial policies. Mr. Benjamin G. Cowins, president of Hampton Machine Tool Company requested an initial loan of $1 million from the St. Louis National Bank in order to purchase the stocks of several dissident shareholders, with a current interest rate of 1.5% monthly. Even though the company had excess money for normal operations, they did not have enough for their stock redemption that the company was currently interested in. However, Mr. Cowins sent Mr. Jerry Eckwood an additional letter requesting for an additional $350,000 to their loan in order to improve the overall performance of the company. The issue that Mr. Eckwood is concerned with is whether or not he should give HMTC the additional $35,000 loan and if he does extend this loan, will they be able to repay the loan within the duration of time that they are given. HMTC is very conservative financially which has allowed them to survive and continue to succeed. Knowing this allows HMTC to be a reliable and trustworthy corporation. However, in the previous year, they were not truly financially stable and were lucky to stabilize, for competitors were forced out and HMTC was able to increase their market share during this time. Due to the company’s conservative financial policies, they did not have any debt on their balance sheet for the past ten years prior to December 1978. This case analysis will identify the key issues between St. Louis National Bank and Hampton Machine Tool Company in regards to the request of the loan totaling $1.35 million, with alternative recommendations for

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