As described in a Khan Academy video, Merrill Lynch offloaded some CDOs to an entity called Lone Star Funds in the following way: (1) the purchase price was marked as \$6.7B; (2) Lone Star provided \$1.7B in cash; (3) Merrill Lynch provided a \$5B loan for the rest of the purchase; (4) if Lone Star defaults on the loan, their only exposure is the CDOs themselves.
This creates an interesting arrangement where \$6.7B is kind of like a strike price on an option. If the CDOs are worth less, then Lone Star loses all of the \$1.7B and Merrill takes a haircut proportional to how much less. If they are worth more than \$6.7B, Merrill caps out at \$6.7B and Lone Star receives the profit.
Is this kind of arrangement common (I am completely new to finance)? Does it have a name? At first, it seemed like a way of cooking the books (marking the sale price of the CDOs higher than it was) but when I thought about it, it seemed more like a speculative arrangement on its price.