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treasury risk inherent in the debt so as to capitalize on
expected changes in interest rates.
A document entitled "Liability Management Partnership
Executive Summary", dated October 11, 1989, purports to identify
the main non-tax advantages of the contemplated partnership
structure at about the time that it was approved by Colgate's
senior management.
The proposed Liability Management
Partnership (the "Partnership") has been
developed specifically for Colgate-Palmolive
("Colgate") to enable it to most efficiently
manage the term structure of its liabilities,
using predominantly its partners' capital.
Normally an issuer's acquisition of its own
debt involves three events, the acquisition
of the debt, the retirement of the old issue
and the issuance of substitute financing.
The Partnership provides the opportunity to
separate the timing of these events * * * by
(i) acquiring Colgate debt in the market
today, while it remains available, and (ii)
placing such debt in "friendly hands," to be
retired, modified or exchanged at an
advantageous time in the future.
* * * * * * *
Despite the current opportunity to
acquire its debt, Colgate does not wish to
immediately retire all of such debt and issue
substitute financing. This reluctance is
based in part on Colgate's current rate
outlook (i.e., anticipation of gradual return
to a positively-sloped yield curve) and in
part on Colgate's desire not to permanently
restructure all of such debt immediately.
* * *
* * * * * * *
The Partnership provides Colgate with
flexibility to exchange the Colgate debt held
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