- 66 - quarterly installments, together with interest on the unpaid balance at a rate of LIBOR plus 35 basis points. The spread over LIBOR increased to 85 basis points after March 1, 1990, if Merrill did not first exercise its right to call the notes at a price equal to the unpaid principal balance and terminate the swap. From Sparekassen's perspective, the structured transaction was similar to investing in an amortizing loan that paid a margin over LIBOR, rather than in volatile LIBOR Notes. From Merrill Capital's perspective, the transaction provided an asset whose volatility matched and offset the volatility of its liability under the hedge swap with BFCE or BOT. The step-up in Merrill Capital's payment obligations provided it a financial incentive to exercise its call right and cancel the swap. Petitioner's expert, Beder, concluded that as of the time of its acquisition of the BFCE Notes, Sparekassen could have expected a net present value benefit of $7,208, equivalent to a return on its investment of 41 basis points more than that available in the direct interbank market.Page: Previous 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 Next
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