Merrill Lynch & Co., Inc. & Subsidiaries - Page 13




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               operating losses (“NOL’s”) not used in the various                     
               ML&Co. 1986 unitary returns.  The remaining liabilities                
               in Leasing would consist solely of deferred taxes.                     
                    MLCR will then sell the stock of Leasing.  * * *                  
          The 1986 retained assets were not included in the description of            
          ML Leasing’s portfolio.                                                     
               On June 19, 1986, Mr. Sands prepared a memorandum entitled             
          “Status of ML Leasing Sales Effort”.  The memorandum reported on            
          a telephone call Mr. Sands received from Mr. Smith, the Vice                
          President-Finance for Inspiration.  As summarized in the                    
          memorandum, Mr. Smith “expressed strong interest” in purchasing             
          ML Leasing and reported that he had prepared a detailed analysis            
          for consideration by Inspiration’s executive committee.  Although           
          Mr. Smith had expressed reservations about the status of                    
          Inspiration’s NOLs and about the lack of certainty regarding the            
          lease residual values, Mr. Sands reported that Mr. Smith’s                  
          concern regarding Inspiration’s NOLs was not a serious problem              
          and that Mr. Smith’s concern regarding the residual values would            
          be addressed in a meeting on June 23 when Mr. Smith and his staff           
          would meet with a representative of ML Leasing to review the                
          residuals on a lease-by-lease basis.  Mr. Sands reported that, if           
          Mr. Smith were satisfied after the June 23 meeting, Inspiration             
          “will make a go - no go decision on buying Leasing at the $80               
          million asking price based on the assumption that the residual              
          values can be confirmed by an outside appraiser.”                           






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