- 117 - Colgate's Financial Exposure to Partnership Portfolio (Based on Pohlschroeder's Projections) ( $ millions ) Base Level 200 Basis Pt.Change Decline Long Bonds (42.00) (51.45) (9.45) Met Note (98.00 (104.66) (6.66) Total liabilities (140.00) (156.11) (16.11) Partnership interest(15%)21.00 23.42 2.42 Net liabilities (119.00) (132.69) (13.69) LIBOR Notes 60.00 48.99 (11.01) Partnership interest(15%)9.00 7.35 (1.65) Net position (110.00) (125.34) (15.34) 200 Basis Pt. Change Rise Long Bonds (34.88) 7.12 Met Note (92.18) 5.82 Total liabilities (127.06) 12.94 Partnership interest (15%) 19.06 (1.94) Net liabilities (108.00) 11.00 LIBOR Notes 69.90 9.90 Partnership interest (15%) 10.48 1.48 Net position (97.52) 12.48 The parentheses in the table reflect that the Long Bonds and Met Note are liabilities for Colgate. Changes in the value of these liabilities are offset in part by changes in the value of Colgate's 15-percent interest in the partnership portfolio comprising these bonds and LIBOR Notes. When interest rates fall, Colgate's bonds appreciate, resulting in a $16.11 million decrease in the market value of Colgate's net worth. This loss represents the opportunity cost to Colgate of being locked into a fixed rate liability that now exceeds the prevailing cost of capital in the market. By virtue of its proposed 15-percent ownership share in the partnership portfolio, Colgate realizes a gain that offsets this loss in part: The net effect on ColgatePage: Previous 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 Next
Last modified: May 25, 2011