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That new loan was to be secured by the buildings owned by NMSC
and 300 Montgomery Associates.
A letter dated March 3, 1986 (March 3, 1986 letter) from
Henry Yung, an officer of Union Bank, to Patrick Kwok of Standard
Chartered Bank HK, an affiliate of Union Bank,37 indicated that,
when Union Bank's weighted average interest rate on the loans it
had outstanding to Radcliffe and to BOT (viz., the UB $570,000
renewed loan, the UB $325,000 loan, the UB $800,000 Radcliffe
loan, the UB $1,300,000 loan, and the UB $1,830,000 loan) was
compared to its weighted average cost of funds and overhead
costs, it was losing money on those loans. The March 3, 1986
letter further indicated that Union Bank was losing money on
those loans even when earnings from deposits that were not
connected with such loans were taken into account. Mr. Yung also
stated in that letter that Union Bank nonetheless was willing to
renew the loans it had funded to Radcliffe and to BOT on terms
that would allow it to break even on them. In this regard, the
37 The Mar. 3, 1986 letter was prompted by petitioner's request
that the loans that Union Bank had funded to Radcliffe and to BOT
and that are at issue herein be renewed at interest rates that
were to be set at 1 percentage point in excess of the interest
rates on the various deposits that secured those loans. It
appears to us that, in early 1986, petitioner was pursuing at
least two alternative possible courses of action for restructur-
ing the loans at issue involving Union Bank: (1) replacing them
(along with the Bangkok Bank LA branch loans) with a new loan
secured by the buildings of NMSC and 300 Montgomery Associates
(see discussion above) and (2) altering the manner in which the
interest rates on the then outstanding Union Bank loans were to
be determined.
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