- 59 -
approximately one-half of the overall decline in long-term debt
during this year. As of December 31, 1991, the value of
Southampton's and Colgate's capital accounts plus the proceeds
that had been received from sale of BFCE LIBOR Notes exceeded the
costs of their combined investment in the partnership by
approximately $5.42 million, representing a pre-tax internal rate
of return of 4.7 percent. More than 2 percentage points of this
return was attributable to the appreciation of the partnership's
Colgate debt caused by further declines in interest rates in the
month following Kannex's redemption.
8. Merrill's Collateral Swap Transactions
The origination and remarketing costs of nearly $2 million
that Colgate incurred through its partnership strategy
represented the costs of a highly complex structure of collateral
swaps arranged and executed by Merrill for the purpose of
accommodating the investment in and divestment of assets
qualifying for contingent payment sale treatment. This section
outlines the transactions that Merrill entered into with BOT,
BFCE, and Sparekassen between the issuance of the LIBOR Notes in
November 1989 and the partnership's sale of the BOT LIBOR Notes
in December 1991.
13(...continued)
1991 owing to a scheduled principal payment ($12.5 million).
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