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AYR » Topics » An increase in our borrowing costs may adversely affect our earnings and cash available for distribution to our shareholders; a decrease in interest rates may result in losses on hedging contracts and reduce or adversely affect cash available for distribuThese excerpts taken from the AYR 10-K filed Mar 2, 2009. An
increase in our borrowing costs may adversely affect our
earnings and cash available for distribution to our
shareholders; a decrease in interest rates may result in losses
on hedging contracts and reduce or adversely affect cash
available for distribution to our shareholders.
Our aircraft are financed under long-term debt financings. As
these financings mature, we will be required to either refinance
these instruments by entering into new financings, which could
result in higher borrowing costs, or repay them by using cash on
hand or cash from the sale of our assets.
Our financings are primarily London Interbank Offered Rate, or
LIBOR, based floating-rate obligations and the interest expense
we incur will vary with changes in the applicable LIBOR
reference rate. As a result, to the extent we are not
sufficiently hedged, changes in interest rates may increase our
interest costs and may reduce the spread between the returns on
our portfolio investments and the cost of our borrowings.
Table of Contents
As of December 31, 2008, if interest rates were to increase
by 100 basis points, we would expect the annual interest
expense on our securitizations and term facilities to increase
by approximately $0.6 million on an annualized basis, net
of amounts received from our interest rate hedges. As of
December 31, 2008, the aggregate fair value of our interest
rate swaps and our interest rate forward contracts was a
liability of $276.4 million.
In December 2008, we terminated interest rate swaps which were
to hedge future borrowing related to the Airbus 330
acquisitions. As such, we currently have no interest rate
hedging program in place for our anticipated debt financing for
the aircraft we will purchase under the Airbus A330 Agreement.
While we expect that an increase in interest rates would create
upward pressure on lease rates for the aircraft, there can be no
assurance that any increase in our borrowing costs resulting in
an increase in interest rates will be fully or even partially
compensated for by any such upward pressure on lease rates.
An increase in our borrowing costs may adversely affect our earnings and cash available for distribution to our shareholders; a decrease in interest rates may result in losses on hedging contracts and reduce or adversely affect cash available for distribution to our shareholders. Our aircraft are financed under long-term debt financings. As these financings mature, we will be required to either refinance these instruments by entering into new financings, which could result in higher borrowing costs, or repay them by using cash on hand or cash from the sale of our assets. Our financings are primarily London Interbank Offered Rate, or LIBOR, based floating-rate obligations and the interest expense we incur will vary with changes in the applicable LIBOR reference rate. As a result, to the extent we are not sufficiently hedged, changes in interest rates may increase our interest costs and may reduce the spread between the returns on our portfolio investments and the cost of our borrowings.
Table of ContentsAs of December 31, 2008, if interest rates were to increase by 100 basis points, we would expect the annual interest expense on our securitizations and term facilities to increase by approximately $0.6 million on an annualized basis, net of amounts received from our interest rate hedges. As of December 31, 2008, the aggregate fair value of our interest rate swaps and our interest rate forward contracts was a liability of $276.4 million. In December 2008, we terminated interest rate swaps which were to hedge future borrowing related to the Airbus 330 acquisitions. As such, we currently have no interest rate hedging program in place for our anticipated debt financing for the aircraft we will purchase under the Airbus A330 Agreement. While we expect that an increase in interest rates would create upward pressure on lease rates for the aircraft, there can be no assurance that any increase in our borrowing costs resulting in an increase in interest rates will be fully or even partially compensated for by any such upward pressure on lease rates. | EXCERPTS ON THIS PAGE:
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