- 65 - The banks could have expected to retain approximately $300,000 of this value. See diagram 1 infra p. 67.17 It was the understanding of BFCE that Merrill would arrange for the resale of the Citicorp Notes after only 1 month, well in advance of the date that the step-up in Merrill's payments took effect. The written agreement contained no such provision, but Merrill found a buyer, and BFCE sold its $50 million principal amount of Citicorp Notes on December 22, 1989. At the same time, the basis swap between Merrill Capital and BFCE was canceled. In January 1990, the basis swap with BOT was terminated, and the remaining $125 million principal amount of Citicorp Notes was resold. Merrill arranged another structured transaction to facilitate Southampton's sale of the BFCE LIBOR Notes to Sparekassen on December 22, 1989. Under the hedge swap between Merrill Capital and Sparekassen, Sparekassen was obligated to make quarterly payments equivalent to those it was entitled to receive from BFCE under the LIBOR Notes. In return, Merrill Capital was required to pay $9,406,180, an amount that corresponded to the purchase price of the notes, in 20 equal 17 As will be seen hereafter, Merrill Capital did not retain all of the remaining $1.5 to $1.6 million of value extracted from the partnership. Some of this value was transferred back to ABNs and Kannex through a separate set of swaps relating to the LIBOR notes.Page: Previous 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 Next
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