FLOATING TO FIXED INTEREST RATE SWAP - SLIDE 1

Floating to Fixed Interest Rate Swap Art

Customers can use floating to fixed interest rate swaps to fix the net interest expense of their floating rate loans. Under these swaps, customers make fixed rate payments and receive floating rate payments that can be used to offset the floating interest expense on a corresponding principal amount of these loans.

BENEFITS

Prepayment versus Unwind Costs
Unlike when customers prepay conventional fixed rate loans, fixed rate payors on interest rate swaps can generally expect a gain if their swap is unwound at a time when market swap rates have risen above the swap's fixed rate. Of course, when market swap rates have fallen, fixed rate payors can generally expect to incur a cost in unwinding their swaps.

Flexible Risk Management
Subject to approval, borrowers can enter into a swap at any time, for any term and on any portion of their variable rate debt.

Independent Hedge
Because swaps and loans are separate facilities, borrowers can allocate the benefits of any of their swaps to any of their loans. In addition, when swaps are executed against a floating index such as LIBOR, borrowers stand to benefit whenever credit spreads on their underlying LIBOR-based debt facilities are reduced during the term of their swaps.