ACM Partnership, Southampton-Hamilton Company, Tax Matters Partner - Page 103

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          Merrill Capital elected to terminate the basis swaps and purchase           
          the Citicorp Notes from the banks at par.                                   
               The basis swaps served a risk management function for the              
          banks.  The net cash flows resulting from the combination of the            
          Citicorp Notes with the basis swaps were tied to LIBOR, the index           
          in terms of which BOT and BFCE, like international banks                    
          generally, conducted most of their business.  The step-up                   
          provisions were negotiated at the request of the banks and were             
          designed to give Merrill Capital a financial incentive to make              
          arrangements for resale of the notes as quickly as possible.                
          Merrill Capital would forgo the exercise of its call option only            
          in the event of a substantial decline in Citicorp's credit that             
          caused the value of the Citicorp Notes to fall by more than the             
          cost of paying the premium.                                                 
               Under the hedge swaps, Merrill Capital was obligated to make           
          quarterly payments over 5 years equivalent to the LIBOR Note                
          payments that the banks were required to make to ACM.  In return,           
          BOT agreed to pay the sum of $25 million in 20 equal quarterly              
          installments plus interest on the unpaid balance at a rate of               
          LIBOR minus 18.75 basis points.  BFCE agreed to pay the sum of              
          $9,831,661 in 20 equal quarterly installments plus interest on              
          the unpaid balance at a rate of LIBOR minus 25 basis points.  In            
          addition, there were two upfront payments:  Merrill Capital paid            
          $35,000 to BOT, and BFCE paid $168,339 to Merrill Capital.  Like            






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