Run-man Bike is a bike sharing service provider in Hong Kong. The company acquired a $500,000 unsecured 1-year term loan
Posted: Wed May 18, 2022 9:36 pm
Run-man Bike is a bike sharing service provider in Hong Kong.
The company acquired a $500,000 unsecured 1-year term loan from
City-one Bank, with a maturity date of Jan 2022. This is now May
2022. The bank loan has been overdue for four months. The Loans
Officer of City-one Bank learned that was because the company
incurred losses due to huge maintenance costs. The management of
Run-man Bike want to see if City-one Bank is willing to extend the
maturity date of the loan for one more year because they are
discussing with secondary schools to arrange sheltered parking
spaces for their bikes which can reduce the maintenance cost and
secured more students users to improve profit. If the strategy is
successful, Run-man Bike expect they could kick out the major
competitor Ba-Ba-Bike to dominate the market.
(a) Referring to Hong Kong Monetary Authority’s loans
classification and provision system, justify (i) as which category
should City-one Bank classify the unsecured loan of Run-man Bike,
and (ii) whether City-one Bank should set aside specific provision
for this borrower.
(b) Suppose City-one Bank would like to know more about the
Run-man Bike’s business strategy of cooperating with secondary
schools before considering loans extension. Generate a list of any
SIX discussion issues to support the coming meeting with Run-man
Bike’s management team. Please provide a brief justification why
each of such issues is necessary.
The company acquired a $500,000 unsecured 1-year term loan from
City-one Bank, with a maturity date of Jan 2022. This is now May
2022. The bank loan has been overdue for four months. The Loans
Officer of City-one Bank learned that was because the company
incurred losses due to huge maintenance costs. The management of
Run-man Bike want to see if City-one Bank is willing to extend the
maturity date of the loan for one more year because they are
discussing with secondary schools to arrange sheltered parking
spaces for their bikes which can reduce the maintenance cost and
secured more students users to improve profit. If the strategy is
successful, Run-man Bike expect they could kick out the major
competitor Ba-Ba-Bike to dominate the market.
(a) Referring to Hong Kong Monetary Authority’s loans
classification and provision system, justify (i) as which category
should City-one Bank classify the unsecured loan of Run-man Bike,
and (ii) whether City-one Bank should set aside specific provision
for this borrower.
(b) Suppose City-one Bank would like to know more about the
Run-man Bike’s business strategy of cooperating with secondary
schools before considering loans extension. Generate a list of any
SIX discussion issues to support the coming meeting with Run-man
Bike’s management team. Please provide a brief justification why
each of such issues is necessary.