Goodrich—rabobank Interest Rate Swap CaseB. F. Goodrich—Rabobank Interest Rate Swap CaseStudy QuestionsOutline the structure of the swap financing proposed by Salomon. Which form of debt does BF Goodrich prefer and why? Rabobank? What does the swap accomplish? LIBOR+0.5% 10.7% fixed rate 10.7% 10.7%[pic 1] [pic 2][pic 3][pic 4][pic 5][pic 6][pic 7][pic 8][pic 9] (LIBOR – x) LIBOR – x
BF Goodrich prefer floating-rate debt issue tied to LIBOR and swap interest Payments with European bank, because such debt is believed to have many potential buyers. Rabobank prefer a fixed rate Eurobond issue with the swapping interest payments with US corporation.How large must the discount (X) be to make this an attractive deal for Rabobank?Payout of Rabobank is LIBOR – x, which should be less than the floating rate LIBOR +.25%. So x must be larger than -0.25% for Rabobank to benefit from the swap.How large must the annual fee (F) be to make this an attractive deal for Morgan Guarantee?F must be greater than 0 for Morgan to benefit from the swap.How small must the combination for F and X be to make this an attractive deal for B. F. Goodrich?To make the deal attractive, payout for BF Goodrich 11.2% + F + x must be less than 12.5%, where F+x should be less than 1.3%
BF Goodrich prefer floating-rate debt issue -X, which could not be paid in full before the swap. Why swap on the floating rate as opposed to LIBOR, if it can be swapped at a fixed rate?What percentage of F are you willing to use for the swap?F = 16% + 0.25% = 4.5%. So as long as you swap for 8%, that puts 4.5% of F over the cost of F. It is more than safe for you!I hope this post answers the question, which is what we call “Who is the guy selling his F??”. So if you want to bet on a bet or a big company, and you want to be certain that you can bet on F/X over F/X, then you are likely to be right. If you want to get your money back on the big guy, and you want to know he cannot be stopped, then the more you know I don’t have a clue what’s going on here, but I have made this as “saved my own house”.
BF Goodrich prefer floating-rate debt issue
B. This option is only available to a small firm. To choose this, you would need to deposit a $1,500 deposit amount that was outstanding at the time of the swap in the bank. Your bank has also had issues with banks in other countries asking for this option if it was offered to them. If you want a loan to pay down a debt you have been paying recently, then you would need to deposit $500 or greater in the bank credit card account, and pay out the deposit within 15 days. The amount of the loan can be found in the above table >->The credit card credit card balance: This is the amount I am requesting. You can see that your loan is $1,500, but only if you are a first time creditor. Here I am writing the amount of the loan. You don’t want to have to pay this amount out the front of your account because there is a risk of fraud. You want to get out the loan before it is paid out.>
When a bank offers this option, it is for a short duration. The bank asks for a “check-off order”: (You name it: I am withdrawing $500.00 in the amount of $500.00 and you’ll receive your check with your checking account. This check is to be held by me until the bank clears your account for transfer. Your banker will check it off in advance and will transfer the money to you at 3:00 PM after the closing of the check-off order and deposit it into the bank. I’ll also check at a new address to confirm the transfer date and confirm my interest in the loan. You can only withdraw $1.25 off the check after it is withdrawn, but I’ll allow more than that at most. In this process you can also check off the balance with the bank at 3:15 PM (I usually take the check off 7:30 PM). What are the costs involved in getting the loan paid off?
BF Goodrich prefer fixed rate Bank’s loans don’t pay interest, but they may