Learn about Interest Rates

Ranell’s oblique reference to the recent suicide of GML’s Chief Financial Officer cast a pall over the team. Silently, they cast furtive looks across the boardroom table.

Once again, Larbonne stepped in for the rescue. “I'm sorry, Josef," he placed a comforting hand on Ranell’s shoulder. “When the FED increases the interest rates, it decreases the profit margin for banks who made loans when the interest rates were lower. Almost all of GML's outstanding debt accrued before the interest rates got this high. So, our current loans are considered to be underperforming."

“Upside-down is more like it,” Anderson spat acerbically. He made no effort to be comforting. “The new national bank we have to deal with now will lose money if they agree to our refinancing package.”

“So why don’t we just agree to pay them at a higher interest rate?” Isn’t the solution obvious? “All we need is to cover operating costs until the Strange Lake deal starts to produce. We just need a little time!”

The frown Larbonne wore deepened into a mask of grief. “I’m afraid time is what we do not have. All the banks are experiencing a liquidity crisis now. They need cash to prevent further runs on their banks. We're being asked to pay off all our outstanding debt before they agree to extend us new lines of credit to cover our ongoing operating costs.”

“Pay off all our outstanding debt? What kind of money are we talking about, Dominique?" Now they’d arrived at the crux of the matter.

"Let us show you the numbers," Larbonne guided him to his seat. The team would spend the next several hours poring over GML’s financials.