- 109 -
them. Colgate's share of this income (through Southampton) was
about 17 percent (approximately $204,840), significantly less
than the transaction costs incurred in the CINS transaction.
The initial coupon on the Citicorp Notes offered a three
basis point advantage over the yield that the partners'
contributions were currently earning in an ABN deposit account.
Had the Citicorp Notes retained that yield advantage for the
duration of the 24-day holding period, they would have provided
ACM with $3,500 more income, of which Colgate's share would be
about $600. Another alternative investment for the partnership
cash was a portfolio of short-term money market instruments like
those which it acquired with the $140 million cash proceeds of
the contingent payment sale and which matured 1 week later on the
settlement date for the purchase of the Colgate debt. These
commercial paper issues provided yields ranging from 8.15 to 8.20
percent, 45-50 basis points less than the 8.65-percent coupon
payable on the remaining $30 million Citicorp Notes for the
second reset period. This yield differential was likely to have
been attributable in part to a declining trend in short-term
interest rates throughout the fall of 1989, which the coupon rate
on the Citicorp Notes reflected only after a lag. Assuming,
however, that at the time ACM acquired the Citicorp Notes they
would have provided the same 50 basis point advantage over
alternative commercial paper investments over the 24-day holding
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