ACM Partnership, Southampton-Hamilton Company, Tax Matters Partner - Page 116

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          amount ($80,779,000), equal to Kannex's 82.63 percent share of              
          the combined total notional principal amount of the BOT and BFCE            
          Notes.  Likewise, in the BFCE swap, the principal amount of the             
          amortizing leg ($9,831,661) was equal to 50/175, or 28.5 percent            
          of the combined total issue price of the BOT and BFCE Notes                 
          ($34,410,814); in the ABN swap, the principal amount of the                 
          corresponding leg was $28,433,655, an amount approximately equal            
          to Kannex's 82.63 percent share of the combined total issue price           
          of the BOT and BFCE Notes.  If, as Beder concluded, the                     
          amortizing leg was worth more than then fixed notional leg in the           
          BFCE swap, that asymmetry in value would necessarily have been              
          magnified in the larger, but structurally identical, ABN swap.              
          The second respect in which the swaps differed was that Merrill             
          Capital occupied the position of the net creditor in the BFCE               
          hedge swap but that of the net debtor in the ABN swap.  The hedge           
          swap between ABN and Kannex was in all respects identical to the            
          hedge swap between Merrill Capital and ABN, except that ABN now             
          assumed the position of net debtor.                                         
               The effect of the back-to-back hedge swaps would have been             
          to transfer from Merrill Capital to ABN and from ABN to Kannex a            
          portion of the value extracted from the partnership through the             
          transaction spreads it was charged in the contingent payment                
          sale.  This transfer partly indemnified Kannex for its share of             
          the partnership's economic loss.                                            






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