ACM Partnership, Southampton-Hamilton Company, Tax Matters Partner - Page 107

                                       - 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.                                                                      






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