- 40 -40
statements. In addition, the ABN loan-approval committees
authorized the loan only after they were assured that the loan
contained terms and degrees of risk commensurate with loans that
it ordinarily makes.
ABN, like most prudent lenders, attempted to insulate itself
from credit risk by establishing certain safeguards. It insisted
that most of ASA's investments be in high-grade, low-risk, short-
term notes. In addition, by lending the funds through Barber and
Dominguito, rather than directly to AlliedSignal, ABN established
a direct interest in, what Mr. den Baas characterized as, a
"gorgeous portfolio" of AAA-rated, diversified, high-grade
assets, rather than a $990 million loan to a single A-rated
company. Furthermore, ABN had collateral for the funds it
transferred to ASA, because ASA's commercial paper was physically
kept in ABN's vault and ASA's other investments were maintained
in a custody account at ABN New York.
ABN merely sought its specified return. This return was
equivalent to interest and was guaranteed by AlliedSignal. The
parties agreed that ABN would be repaid according to a specified
schedule, which established fixed maturity dates when ABN was to
be repaid (i.e., August 1990, March 1991, and full repayment by
May 1992). If AlliedSignal missed a payment date, it compensated
ABN for the prolonged period (e.g., the December 5, 1991, payment
of $231,250 of interest because ASA partially redeemed ABN's
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