ACM Partnership, Southampton-Hamilton Company, Tax Matters Partner - Page 62

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          rates on the value of Colgate debt and LIBOR Notes in the                   
          partnership portfolio.  These analyses purport to demonstrate               
          that the interest rate sensitivity of the interest-only LIBOR               
          Notes greatly exceeds that of fixed rate debt instruments of                
          equal maturity and is comparable to that of long-term fixed rate            
          debt.  Thus, a 100 to 200 basis point increase or decrease in               
          interest rates would produce roughly equal and offsetting changes           
          in the value of $1 of LIBOR Notes, $2.34 of 9 percent 5-year                
          Colgate debt, and $0.88 of 9-5/8 percent 30-year Colgate debt.              
               Pohlschroeder was impressed with Merrill's analysis.  In an            
          October 3, 1989, memorandum written for the purpose of                      
          recommending the "ABN Liability Management Partnership" to his              
          superior, Colgate treasurer Brian Heidtke (Heidtke),                        
          Pohlschroeder explained how the composition of the partnership's            
          portfolio would be planned to serve the purpose of "risk                    
          management within the partnership".  "One aspect of importance is           
          the interest rate exposure on the asset of the partnership which            
          consists of Colgate debt.  To minimize the exposure to ABN and              
          Colgate, it is planned to convert a portion of the short-term               
          notes to contingent LIBOR Notes as a hedge of the partnership's             
          fixed rate assets."  Although the hedge ratio would be determined           
          through negotiations with ABN, he was confident that the                    
          partnership could acquire $140 million of Colgate debt, and that            
          $60 million of LIBOR Notes would provide an appropriate level of            
          protection.  The plan was to adjust "the LIBOR note hedge" as               




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