Longs Drug investors announce additional swap agreements

By Lisa Kerner

Charlotte, N.C., Aug. 12 - Longs Drug Store Corp. investors Pershing Square LP and Pershing Square International, Ltd. entered into cash-settled total swap agreements on Aug. 8 and Aug. 11, it was reported in a schedule 13D/A filed with the Securities and Exchange Commission.

Pershing previously reported entering swap agreements on Aug. 6 and Aug. 7.

The swaps are known as PSLP swaps and PSIL swaps, and together with the PSLP swaps, the amendment No. 2 swaps.

According to the filing, the amendment No. 2 swaps constitute economic exposure to about 756,000 notional shares of common stock, have reference prices ranging from $53.55 to $54.69 and expire on dates ranging from Nov. 30, 2009 through Aug. 31, 2010, respectively.

Pershing said that under the terms of the amendment No. 2 swaps:

• The applicable Pershing Square Fund will be obligated to pay to the counterparty any negative price performance of the notional number of shares of common stock subject to the applicable amendment No. 2 swap as of the expiration date plus interest; and

• The counterparty will be obligated to pay to the applicable Pershing Square Fund any positive price performance of the notional number of shares of common stock subject to the applicable amendment No. 2 swap as of the expiration date of the swap.

Pershing Square International will be entitled to cash payments during the term of the PSIL swap in lieu of any dividends received by the counterparty on such notional shares of common stock.

Regarding the PSLP swaps, at maturity Pershing Square, LP will receive a cash payment from the counterparty equal to any dividends received by the counterparty on such notional shares of common stock during the term of the PSLP Swaps.

All balances will be cash settled at the expiration date of the amendment No. 2 swaps.

Pershing Square Funds' counterparties for their swaps include entities related to BNP Paribas, Citibank, Credit Suisse and UBS, according to the filing.

Longs Drug is a Walnut Creek, Calif., drug store chain.

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