Opinion ID: 714943
Heading Depth: 2
Heading Rank: 2

Heading: Violations of Financial Covenant

Text: 14 While the Companies were misleading the banks by providing them with false financial statements and borrowing base reports, they also were violating the agreement's financial covenant by maintaining highly speculative trading positions. The agreement between the Arochem Companies and the banks prohibited the Companies from holding a net unhedged position in oil of more than one million barrels. However, the Companies regularly violated this covenant. For instance, the Companies' net unhedged position was in excess of one million barrels approximately 80% to 85% of the time during the period January, 1990 through January, 1991. By November of 1990, the Arochem Companies were maintaining net unhedged positions of up to 10 million barrels of oil. The Companies never informed the banks that they were engaged in such highly speculative trading.