- 63 -
cash and contingent payments based upon LIBOR. The resolution
does not explain the basis for Merrill Lynch's recommendation to
sell the IBJ CDs.
On July 27, 1990, Otrabanda sold its IBJ CDs to Sumitomo
Bank Capital Markets (Sumitomo) for $80 million in cash and 4
installment purchase agreements dated July 27, 1990 (Sumitomo
LIBOR notes) each with a stated NPA of $13,349,000 for a total
NPA of $53,396,000.
The sale of the IBJ CDs to Sumitomo included $201,562 of
interest that had accrued on the IBJ CDs for the period from July
18, 1990 through July 27, 1990. Otrabanda included this amount
in interest income on its Form 1065 for the taxable year ended
July 31, 1990.
Each of the Sumitomo LIBOR notes that Otrabanda received
provided for 20 quarterly payments of an amount equal to 3-month
LIBOR, generally set 3 months preceding the payment date,
multiplied by (1) the NPA of each note and (2) a fraction
consisting of the number of days between payment dates divided by
360. Payments on the Sumitomo LIBOR notes were to commence on
November 1, 1990, and to conclude on August 1, 1995. The
effective date of the Sumitomo LIBOR notes was August 1, 1990.
Otrabanda sold the IBJ CDs at 99.25 percent of par, or at a
private placement discount of $750,000 (75 basis points x
$100,000,000). Pepe of Merrill Lynch determined the origination
Page: Previous 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 NextLast modified: May 25, 2011