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Executives technically were buying a contract, known as a prepaid variable forward, in tandem with a contract called a sale lending agreement.
Wall Street has also been churning out private prepaid variable forward deals.
Stevenson's deal with Merrill was essentially a prepaid variable forward contract a "kinky forward," it's been called.
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The transaction, known as a variable prepaid forward, minimizes potential losses for shareholders and gives them access to cash.
The coupling of a stock lending agreement with a variable prepaid forward was common until early 2006, when the IRS released a technical advice memo indicating it would regard this setup as a sale.
Willens noted that earlier this year, Starr International, Maurice Greenberg's investment vehicle, entered into a variable prepaid forward for up to 10 million shares of common stock of AIG, receiving $278 million upfront.
In a variable prepaid forward, the owner of a big, highly appreciated stock position gets an upfront payment from an investment firm typically for 75% to 85% of the value of his shares in exchange for agreeing to deliver a variable number of shares or cash in the future, with the exact amount dependent on how the stock performs.
Robert Gordon, president of Twenty-First Securities, a firm that specializes in tax-efficient and hedging strategies for the wealthy, said lending shares to a Wall Street firm in connection with a variable prepaid forward was common until early 2006, when the IRS released a technical advice memo indicating it would challenge this set-up.
All orders must be prepaid.
Unsubsidized handsets are often called "prepaid".
But there are prepaid cards and prepaid cards.
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