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would be due October 15, 1988. This same day, petitioner's
executive and finance committee authorized and approved the
issuance of a $70 million note to Finance.
On October 15, 1981, Finance issued notes in the Eurobond
market in the amount of $70 million, at an interest rate of 17-
1/4 percent. The notes were listed on the stock exchange of the
United Kingdom and the Republic of Ireland. The timely payment
of the principal amount and the interest was unconditionally
guaranteed by petitioner, and the notes contained a call option
in 1985 for a 1.5-percent premium, and in 1986 for a .75-percent
premium. Also on October 15, 1981, petitioner issued a $70
million, 18-1/4 percent note due on October 15, 1988, to Finance,
and pursuant thereto, Finance remitted the net proceeds of the
Euronote offering of $68,525,000 to petitioner.3
Petitioner and Finance issued a prospectus in connection
with the Euronote offering that was dated October 7, 1981. The
prospectus provided that prior to the Euronote issuance,
petitioner was to contribute to Finance "cash or property in an
aggregate amount sufficient to bring total stockholder's equity
to $28,000,000."
3Finance's Euronotes were issued at a discount of
$1,475,000, which Finance amortized over the term of the notes.
The discount consisted of $875,000 (1.25 percent) original
issuance discount, $262,500 (.375 percent) broker/manager
commission, $262,500 (.375 percent) underwriter commission, and
$75,000 for broker/manager out-of-pocket legal fees and expenses.
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