Merrill Lynch & Co., Inc. & Subsidiaries - Page 38




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          million as a result of an increase in the reserve for losses and            
          a net reduction in expected future residual values.                         
               On June 1, 1987, the GATX Finance Committee approved the               
          proposal to acquire the capital stock of ML Capital Resources for           
          a purchase price of $63.3 million, subject to certain specified             
          conditions.  The GATX Finance Committee recommended that the                
          proposed transaction be forwarded to the GATX board of directors.           
               G.  Continued Negotiations                                             
               After executing the nonbinding letter of intent, petitioner            
          and GATX/BCE continued their negotiations.  In conjunction with             
          GATX/BCE’s due diligence review of the lease portfolio,                     
          petitioner and GATX/BCE agreed that it was impractical to examine           
          each lease separately because the lease portfolio consisted of              
          such a large number of relatively small leases.  Therefore, they            
          agreed to use a “statistical sampling technique”, whereby the               
          parties would jointly pick a certain number of leases at random             
          to examine in significant detail and compare them to the                    
          representations made by Merrill Parent in the 3-volume offering             
          memorandum.  The results of the “statistical sample” were not               
          satisfactory to GATX/BCE; i.e., a larger than expected portion of           
          the leases did not coincide with Merrill Parent’s representations           
          in the 3-volume offering memorandum.                                        
               From May 22 through June 25, 1987, negotiations continued in           
          order to accommodate the adjustments revealed by the due                    






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