three paddlewheel steamboats cruising on the Mississippi River and one ship servicing the Hawaiian Islands, to a much larger fleet by adding six new ships: the Debtors purchased two existing ships (the Columbia Queen, which serviced the Pacific Northwest, and the Patriot, which serviced the Hawaiian Islands) and contracted for the building of four pew ships (the Coastal Vessels and the Project America Ships).
The Plaintiffs' expert, Perry Mandarino ("Mandarino"), testified that, as a result of this expansion, the Debtors' indebtedness grew from approximately $84.6 million as of December 31, 1999 to over $577 million as of June 30, 2001. (Tr. at 367-68, PTE 9, Ex.L). In the same period, the Debtors' operations were generating declining EBITDA, falling from an EBITDA of $18.1 million as of December 31, 1999,created in June and July 2001 show that bookings in the Hawaii market were increasing at a rate suggesting the Debtors would exceed their previous forecasts for the third and fourth quarters of 2001. (DTE 108, 113). Statements in the June 30, 2001 Form 10-Q show that the company had implemented a cost-reduction strategy to decrease costs in the second half of 2001 and that management anticipated that the company would have access to capital resources sufficient to meet its current short-term and long-term capital needs. (DTE 151). Further, in the summer of 2001, the Debtors resolved a dispute with Ingalls regarding the construction of the Project America Ships. (DTE 25). The settlement was critical to the Debtors because it resolved open issues regarding the delivery dates *512