- 8 -8
directly reducing ABN's involvement to $500mm.
First week of December 1990, the * * * [corporations']
interests will be further reduced by $300mm., either by
direct buy-down or distribution of assets from the
partnership, to $200mm.
First week of May 1992, the * * * [corporations] will
be taken out of the partnership fully.
Mr. den Baas described the purpose of the transaction as "the
same as all the other Curacao based partnerships". The
memorandum further stated:
AlliedSignal Inc. has a capital gain tax liability and
this will cure their liability.
The remuneration will be 30 bps. on the loan * * * to
the * * * [corporations] plus a fee directly from
Allied Signal Inc. to ABN New York representing an
additional 45 bps. over the outstanding amounts bringing
the total to 75 bps. over LIBOR. Furthermore Allied
Signal Inc. will make ABN whole for the difference between
* * *[commercial paper] and LIBOR * * * upfront. The net
income will be $5.5mm. received partly over time in the
loan and partly in fees from Allied Signal Inc.
ABN knew that the partnership's income allocations alone
would not provide the requisite return (i.e., 75 b.p. over LIBOR
on funds transferred to the partnership). AlliedSignal would
have to supplement these allocations with direct payments to ABN.
As Mr. den Baas stated in another internal memorandum:
Since the * * * [partnership] structure itself will not
carry the possibilities for * * * [a return of 70-80
b.p. over LIBOR], income will be received by ABN New
York in upfront payments made by * * * [AlliedSignal].
Although generally comfortable with the venture, ABN
officials expressed concern regarding a potential loss relating
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