ASA Investerings Partnership, Alliedsignal Inc., Tax Matters Partner - Page 15

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             partner's, fiscal year).                                                                             
             IV.  ASA's Transactions                                                                              
                    A.  Purchase of PPNs                                                                          
                    On April 25, 1990, ASA purchased $850 million of 5-year PPNs                                  
             with put options exercisable on November 20, 1991.  Of these                                         
             PPNs, $350 million were issued by the Long Term Credit Bank of                                       
             Japan (LTCB) and rated AA by Standard and Poor's.  The remaining                                     
             $500 million of PPNs was issued by Sumitomo Bank Capital Markets,                                    
             Inc. (Sumitomo), and rated AA+ by Standard & Poor's.                                                 
                    Merrill Lynch induced LTCB to issue the PPNs by arranging                                     
             basis swaps (i.e., the exchange of payments based on one variable                                    
             interest rate for payments based on another variable interest                                        
             rate) that converted LTCB's cost of capital for issuing the PPNs                                     
             to an attractive sub-LIBOR interest rate.  These swaps provided                                      
             that Merrill Lynch would pay LTCB an amount equal to the coupon                                      
             rate of the LTCB PPNs.  In exchange, LTCB paid Merrill Lynch a                                       
             sub-LIBOR rate on the face amount of the PPNs.                                                       
                    B.  Sale of PPNs and Acquisition of LIBOR Notes                                               
                    On May 8, 1990, the ASA partnership committee met in Bermuda                                  
             and adopted a resolution authorizing and directing the sale of                                       
             the PPNs for consideration consisting of approximately 80 percent                                    
             cash and 20 percent LIBOR notes.  Between May 17 and 24, 1990,                                       
             ASA sold the PPNs to Mitsubishi Bank, Ltd. (Mitsubishi) and                                          
             Banque Francaise du Commerce Exterieur (BFCE).  Standard and                                         





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