love to be a fly on the wall, page-37

Look the interest rate swaps looked good when interest rates were rising ( they were $100m in the money at 30 June 2008) and would not be a problem if they were not selling the business, as it simply locks in a rate for a term and under hedge accounting rules it is fine. But the sad reality is when you go to pay out a fixed rate loan ( $billions) when the fixed rate is well out of the money it hurts big time! So whilst they seek to pass the interest rate swaps on with the business the purchaser will deduct the out of the money swap value off the fair value of their offer for the assets. We have seen 30 cents per share gone since June and I fear another 20+ cents between now and completing the Strategic transaction. let's hope the biddrs still see value and do their modelling on lower rates thereby increasing their underlying valuations.