Interest Rates Swap

Abad. Bautista. Bumagat. Karunungan. Uy

COMPANY

FLOATING
(SemiAnnual)

FIXED
(SemiAnnual)

BF GOODRICH

LIBOR + 0.50%
(Proposal)

12.00% - 12.50%
(Would/Should Have Been)

RABOBANK

LIBOR + 0.25%
(W/SHB)

10.71%
(Proposal)

RABOBANKS ADVANTAGE

0.25%

1.29% - 1.79%

TOTAL GAIN IF SWAP HAPPENS/COMPARATIVE ADVANTAGE = 1.04% - 1.54%

LIBOR X%
(SemiA)
F% (SemiA)

GOODR

11% p.a.
(10.7% SemiA)
LIBOR + 0.5%
(SemiA)

LIBOR X%
(SemiA)

MORGAN

RABO
11% p.a.
(10.7% SemiA)
11% p.a.
(10.7% SemiA)

FLOW

BF GOODRICH

RABOBANK

MORGAN

PAYMENTS

LIBOR + 0.50% (W/SHB)

10.71%
F%

10.71% (W/SHB)
LIBOR X%

10.71% to RABO
LIBOR X% to BF

RECEIPTS

LIBOR X%

10.71%

LIBOR X% from RABO

10.71% from BF
F% from BF

NET COST

11.21% + F% + X%

LIBOR X%

F%

W/SHB

12.00% - 12.50%

LIBOR + 0.25%

GAIN/LOSS (W/SHB - NC)

0.79% - 1.29% - F% - X%

0.25% + X%

F%

TOTAL GAIN IF SWAP HAPPENS/COMPARATIVE ADVANTAGE = 1.04% - 1.54%

TABLE OF GAIN = 1.04% - 1.54%

X%

F%

BF GOODRICH

RABOBANK

MORGAN

0.79% - 1.29% - F% - X%

0.25% + X%

F%

0.00
(0.25) premium
0.79
1.29

0.00
0.00
0.00
0.00

0.79 1.29
1.04 1.54
0.00 0.50
(0.50) 0.00

0.25
0.00
1.04
1.54

0.00
0.00
0.00
0.00

0.00
0.00

0.79
1.29

0.00 0.50
(0.50) 0.00

0.25
0.25

0.79
1.29

For Rabobank, the LIBOR discount should at least be.. -0.25%

For Morgan, there should at least be a fee.
For BF Goodrich, the X% + F% should not be greater than 1.29%
In general, -0.25% < X% < 1.29%, and 0.00% < F% < 1.29%