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Commercial Law Keyed to Zierdt, 1st Ed.
Travel Services Network v. Presidential Financial Corp.
Citation:
959 F. Supp. 135 (1997)Facts
In June 1992, TSN entered into a loan and security agreement with Presidential to finance the purchase of Kaplan Travel Bureau. The agreement set a maximum limit on advance funds equal to 60% of TSN’s select customer account receivables, or approximately $250,000. Presidential required first-priority security interests in TSN’s receivables, direct payment from TSN’s customers to Presidential, and sole discretion over advances. In August 1992, the parties executed an Escrow Agreement for the Kaplan purchase, but no funds were released at closing. In October 1992, Presidential began advancing funds to TSN. In December 1992, TSN’s line of credit was increased to $500,000 to purchase Westport Travel Service. In January 1993, Presidential discovered problems with TSN’s receivables and reduced TSN’s credit line to $275,000. TSN defaulted on payments to Airlines Reporting Corporation (ARC), its biggest creditor. On February 19, 1993, Presidential formally notified TSN of default and ceased further advances. TSN terminated its relationship with Presidential three days later and entered into a less favorable financing arrangement with Banker’s Capital, ultimately going out of business.
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