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partners' allocable shares of these costs were charged to
Southampton's capital account. When Southampton, Colgate and, to
a nominal extent, MLCS acquired Kannex's partnership interest,
they effectively purchased Kannex's share of the BOT Notes at a
price that included Kannex's allocable share of these costs.
Because the LIBOR Notes were acquired for Colgate's benefit, the
partners provided that the remarketing costs would be borne
almost entirely by Colgate as well. This was accomplished by
selling the LIBOR Notes only after Colgate, Southampton and, to
nominal extent, MLCS, had acquired all of Kannex's interest in
them.
Kannex's interest in the BOT Notes could be acquired by
Colgate alone or together with MLCS. If only Colgate purchased
Kannex's interest, Colgate would bear all origination and
remarketing costs allocable to that interest. If Colgate and
MLCS purchased or redeemed Kannex's interest pro rata, each would
bear a pro rata share of these costs. Acquisition of Kannex's
interest by a combination of these methods would result in the
sharing of these costs in some intermediate ratio. This was the
approach that the parties actually adopted, but the evidence
suggests that this decision may not yet have been made in
November 1989. Nevertheless, it is unlikely that Colgate would
have acquired any less than a pro rata share of Kannex's
interest, since the opportunity cost of foregoing valuable tax
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