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Twentieth-Century Business Archives

Abbott Laboratories Deal - Lehman Brothers Collection

Abbott Laboratories

Company Deal$100,000,000 9.20% sinking fund debentures due October 15, 1999
Transaction Typesinking fund debentures
Deal DescriptionAbbott Laboratories used the proceeds received from the sale of debentures to reduce outstanding domestic short-term debt, which on August 31, 1974, amounted to $100,275,000. The short-term debt was incurred to finance capital expenditures and to provide additional working capital for the company's operations. Additional working capital was needed not only to increase unit sales volume but also to increase product costs and price levels. The need for borrowings was significantly increased by the decision to accumulate and invest, rather than repatriate, funds generated by earnings of two manufacturing subsidiaries operating in Puerto Rico under tax-exemption grants that were to expire on December 31, 1985, and February 29, 1988. Repatriation of these funds would have resulted in incurring substantial liability for federal taxes unless the subsidiaries were liquidated. Liquidation prior to the expiration date of the tax-exemption grants would have resulted in forfeiting tax benefits. The company did intend to liquidate the two subsidiaries and repatriate the accumulated funds at the expiration of the respective tax exemptions.
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