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Otrabanda's CINS Transaction
On June 25, 1990, Otrabanda's partners made capital
contributions totaling $150 million. On June 29, 1990, Otrabanda
invested $100 million in the IBJ CDs. On July 18, 1990, IBJ made
a $435,416 interest payment to Otrabanda. Between July 18, 1990
and July 27, 1990, Otrabanda earned interest of $201,562 on the
IBJ CDs. On July 27, 1990, Otrabanda sold the IBJ CDs for $80
million in cash and 4 LIBOR notes with a present value somewhere
between $18,909,546 and $19,451,562. Otrabanda sold the IBJ CDs
worth $100,201,562 ($100 million (principal) plus $201,562
(accrued interest)) for cash and LIBOR notes worth no more than
$99,451,562. The $750,000 difference between the value of the
IBJ CDs and the total consideration that Otrabanda received
represents Otrabanda's transaction costs.
Taking into account the $435,416 interest payment that
Otrabanda received on the CDs, Otrabanda walked away from its
$100 million investment in the IBJ CDs with no more than
$99,886,978.
On October 11, 1990, Brunswick increased its interest in the
LIBOR notes held by Otrabanda by purchasing 50 percent of
Bartolo's partnership interest. On November 1, 1990, Otrabanda
distributed the 4 LIBOR notes to Brunswick. On November 28,
1990, Brunswick sold the 4 LIBOR notes for $17,458,827, resulting
in a loss to Brunswick of approximately $1,700,000.
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