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partly financing the purchase of the IBJ CDs with a conventional
amortizing loan and effectively converted the transaction, from
Sumitomo's perspective, to synthetic funding below Sumitomo's
funding rates. Further, Sumitomo's payments under the hedge swap
were much less volatile than the payments required to be made
under the LIBOR notes.
C. Bartolo-ABN-Merrill Lynch Swaps
Bartolo entered into interest rate swaps with ABN and ABN
entered into mirror swaps with Merrill Lynch to reduce Bartolo's
and ABN's interest rate risk associated with the 4 Sumitomo LIBOR
notes held by Otrabanda.
D. Banque Francaise du Commerce Exterieur Swaps
Merrill Lynch offered BFCE a swap in connection with BFCE's
purchase of the 4 LIBOR notes from Brunswick. The Merrill Lynch-
BFCE swap, which was designed to replicate the economic effect of
investing in an amortizing loan that paid a margin over LIBOR,
effectively converted the purchase of the LIBOR notes, from
BFCE's perspective, to a synthetic amortizing asset at a rate
above BFCE's financing rate.
E. Brunswick Swaps
On October 11, 1990, concurrent with Brunswick's purchase of
50 percent of Bartolo's partnership interest in Otrabanda,
Brunswick and Merrill Lynch entered into a swap agreement. On
November 1, 1990, concurrent with the partial redemption of
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