Itel Corp., the world's biggest leasing company, has suspended cash dividends on common stock at least through next January 30 and increased its estimates of recent losses.
In an announcement today, Itel said a new credit agreement with lending banks required omission of the payouts.
Itel said also that because of greater-than-anticipated losses in its computer activities and a major transportation equipment transaction that didn't close as scheduled, second-quarter losses will be "substantially greater" than the $10 million forecast earlier.
Waivers of certain financial requirements have been received from banks and institutional lenders because of the continued losses in data products -- making it impossible to maintan certan required financial ratios.
[The Washington Post reported Tuesday that Itel borrowed some $250 million to finance the purchases of computer equipmentt after securing Lloyds of London insurance to cover potential losses from introduction of new equipment. But IBM introduced cheaper equipment than those under lease, and Lloyds faces a huge loss.]
[Many banks financed computers based on Lloyd's policies witth Itel and other firms and now want to be paid off, The Post reported. No one knows how much of Itel's leasing business will be canceled but the California firm to date has collected for its lenders -- the biggest being Bank of America -- less than $10 million from Lloyds, The Post said, quotting a source close to the company.]
Ittel said today it signed an agreement with its banks providing for more than $67 million in additional short-term funds tto be used for working capittal. This additional financing commitment will be secured by transportation equipment, Itel said.
In addition to the suspension of cash dividends, tthe agreement ties the payment of preferred dividends through January. 31, 1980, to certain financial objectives.
The company said that about $80 million of privatte institutional lease financing previously arranged for railroad equipment to be delivered to Itel during the remainder of this year won't take place. The company said it is in the process of seeking alternative financing or the cancellation of the delay of these equipment deliveries.