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Respondent's above explanation is consistent with the
following summary of the "basics" of debt-equity-swap
transactions, viewed from the U.S. taxpayer's perspective, as set
forth in an attachment to the brief of Chrysler, as amicus
curiae:
At its simplest, a debt-equity swap (also known as
a debt conversion) involves the purchase by a firm,
usually foreign, of sovereign debt at a discount in the
secondary market from the bank holding it. The issuing
country then buys back the debt in local currency at
close to its face value. The firm spends the local
currency received in an approved manner within the
country, usually to finance a fixed equity investment.
Since the prepayment of the obligation is made at a
substantial discount and the local funds are obtained
at a much smaller discount, firms can realize a
significant gain on the spread. [Business
International Corp., Debt-Equity Swaps: How To Tap an
Emerging Market (1987). Emphasis added.]
With regard to the value of the Mex$1,736,694,000 that was
received, petitioner and the amici curiae argue strenuously that
the Court in our prior opinion improperly considered subjective
factors to minimize the effect of certain restrictions on the use
of the Mexican pesos and that such subjective factors are not
properly considered in the hypothetical, willing buyer/willing
seller scenario that typically governs a determination of fair
market value. We disagree.
The fact that petitioner and Procesos entered into the
transaction for the very purpose of obtaining Mexican pesos to
construct and to operate a lambskin processing plant in Mexico is
an undisputed fact of this transaction. There is nothing
subjective about this fact other than that it relates generally
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