ACM Partnership, Southampton-Hamilton Company, Tax Matters Partner - Page 115

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          the foreign banks.  The banks could have expected to retain only            
          about $300,000 of this value, because their basis and hedge swaps           
          with Merrill Capital were structured in such a way that the                 
          present value of the swap payments they were entitled to receive            
          from Merrill Capital was less than the present value of the swap            
          payments they were obligated to pay to Merrill Capital.  Thus,              
          the value of BFCE's right to quarterly payments of 3-month LIBOR            
          Notes over 5 years on a notional principal amount of $27.91                 
          million was $9.62 million, while the value of its obligation to             
          pay $9,831,661 in equal quarterly installments over 5 years                 
          together with interest on the unpaid balance at LIBOR minus                 
          25 basis points was $9.77 million.  As a result of the                      
          discrepancy in the value of these two legs of the hedge swap,               
          Merrill Capital could have expected to realize a net gain, and              
          BFCE a net loss, of $150,000.                                               
               The hedge swap between Merrill Capital and ABN was                     
          structured in a manner similar to the hedge swap between BFCE and           
          Merrill Capital.  The ABN swap differed from the BFCE swap in               
          only two respects.  First, the payment obligations on both sides            
          of the ABN swap were proportionately larger.  In the BFCE swap,             
          the notional principal amount of the fixed notional leg was set             
          at an amount ($27.91 million) equal to 50/175, or 28.5 percent,             
          of the combined total notional principal amount of the BOT and              
          BFCE Notes ($97.76 million); in the ABN swap, it was set at an              






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