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entered into a contract (sublease) with petitioner, under which
petitioner reserved 75 percent of the vessel’s capacity and was
responsible for 100 percent of the payments due under the
Bareboat Charter; (4) UMTC also entered into an operating
agreement with Marine Transport Management, Inc. (a subsidiary of
MTL), to manage and operate the vessel; and, (5) UMTC entered
into a marketing agreement with another MTL subsidiary to market
the portion of the vessel not used by petitioner, including the
25 percent not reserved by petitioner.
The terms of the Bareboat Charter permitted petitioner to
terminate the lease and walk away from the arrangement by the
payment of a scheduled amount. Petitioner, however, chose to
acquire the vessel. On December 29, 1993, petitioner purchased,
for $107,748,925, Merrill Lynch’s interest in the grantor trust
that held the vessel, including the title to the vessel and
rights to its use. The $107,748,925 payment was about 20 percent
less than the amount that petitioner would have had to pay to
terminate the lease without acquiring ownership of the vessel.7
On June 30, 1994, the Bareboat Charter and related contracts were
canceled, the UMTC partnership was dissolved, and petitioner
acquired title to the vessel from the trust. After December
1993, petitioner did not make any (lease) payments under the
7 For purposes of deciding the issue in this summary
judgment motion, it should not matter whether it was more or less
costly to acquire the vessel or to simply terminate the lease.
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Last modified: May 25, 2011