- 69 -
operating at the time. C&L used 3-year income streams on the two
nonoperating castles instead of the 5-year income streams used on
the operating castles. The New Jersey and Glendale/San Diego
castle amounts were added to the MDT lump-sum amount for a total
of $15.75 million. The MDT discounted present value amounts were
computed as: Buena Park, $9.9 million; New Jersey,
$3.15 million; and Glendale/San Diego, $2.7 million. The
lump-sum amount for MSI was $7 million. Under this plan, MSI and
MDT would have collectively given Manver promissory notes for
$22.5 million in 1987 and paid interest on the promissory notes
monthly. The principal would have been due in 5 years.
Under the lump-sum plan, MSI and MDT would have been subject
to withholding tax on the interest payments to Manver. C&L
therefore suggested that the withholding could be avoided through
the use of commercial paper. C&L advised that there was an
exemption in the U.S. tax law that excused the withholding tax on
interest on promissory notes (commercial paper) with a term of
less than 183 days.
Forsyth dealt primarily with Santandreu and Onate concerning
the commercial paper. The procedure required issuing an initial
round of commercial paper (tranche) with a maturity of less than
183 days. Prior to maturity, the tender panel manager must have
the cash available to repay the first tranche. The cash could
come from a new issue of commercial paper, or, alternatively, the
tender panel manager could call on the guarantor or the company
Page: Previous 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 NextLast modified: May 25, 2011