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On March 13, 1990, Saba conducted a partnership meeting at
Merrill Lynch's office in Toronto. O'Brien represented Brunswick
and Skokie at the meeting, while de Beer represented ABN by way
of a telephone conference call. Taylor and Joel Van Dusen, an
Investment Banking analyst, participated in the meeting on behalf
of Merrill Lynch.
During the meeting, the partners discussed their belief that
interest rates were likely to rise due to a stronger economy,
rising rates in Japan and Europe, and the reunification of
Germany. According to minutes of this meeting, Saba adopted a
resolution (at the suggestion of Merrill Lynch) authorizing and
directing the sale of the Chase PPNs for consideration consisting
of 80 percent cash and 20 percent contingent payments based on
LIBOR. The LIBOR notes would provide for periodic payments at a
designated LIBOR rate on a notional principal amount (NPA) for a
set term. The LIBOR note NPA was not intended to represent the
principal amount due but was used solely as a multiplier to
determine the amount of LIBOR-based contingent payments.
On March 23, 1990, immediately prior to close of Saba's
first taxable year, Saba sold 2 Chase PPNs to Fuji and 2 Chase
PPNs to Norinchukin. In exchange for the 2 Chase PPNs sold to
Fuji, Saba received $80 million in cash and 2 installment
purchase agreements dated March 23, 1990 (Fuji LIBOR notes), each
with a stated NPA of $25,720,000 for a total NPA of $51,440,000.
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