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These excerpts taken from the AYR 10-K filed Mar 2, 2009. Interest
Rate Risk
Interest rate risk is the exposure to loss resulting from
changes in the level of interest rates and the spread between
different interest rates. These risks are highly sensitive to
many factors, including U.S. monetary and tax policies,
U.S. and international economic factors and other factors
beyond our control. We are exposed to changes in the level of
interest rates and to changes in the relationship or spread
between interest rates. Our primary interest rate exposures
relate to our lease agreements, debt investments, floating rate
debt obligations and interest rate derivative instruments. Rent
payments under our aircraft lease agreements typically do not
vary during the term of the lease according to changes in
interest rates. Similarly, our debt investments are
predominately collateralized by fixed rate aircraft leases, and
provide for a fixed coupon interest rate. However, our borrowing
agreements generally require payments based on a variable
interest rate index, such as LIBOR. Therefore, to the extent our
borrowing costs are not fixed, increases in interest rates may
reduce our net income by increasing the cost of our debt without
any corresponding increase in rents or cash flow from our
securities.
Changes in interest rates may also impact our net book value as
our derivative instruments and debt investments are periodically
marked-to-market through stockholders’ equity. Generally,
we are exposed to loss on our fixed pay interest rate swaps and
interest rate forward contracts to the extent interest rates
decrease below their contractual fixed rate. Also, as interest
rates increase, the value of our fixed rate debt investments
generally decreases. The magnitude of the decrease is a function
of the difference between the coupon rate and the current market
rate of interest, the average life of the securities and the
face amount of the securities.
The relationship between spreads on debt investments and
derivative instruments may vary from time to time, resulting in
a net aggregate book value increase or decrease. Changes in the
general level of interest rates also can affect our ability to
acquire new investments and our ability to realize gains from
the settlement of such assets.
Interest Rate Risk Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. These risks are highly sensitive to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. We are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates. Our primary interest rate exposures relate to our lease agreements, debt investments, floating rate debt obligations and interest rate derivative instruments. Rent payments under our aircraft lease agreements typically do not vary during the term of the lease according to changes in interest rates. Similarly, our debt investments are predominately collateralized by fixed rate aircraft leases, and provide for a fixed coupon interest rate. However, our borrowing agreements generally require payments based on a variable interest rate index, such as LIBOR. Therefore, to the extent our borrowing costs are not fixed, increases in interest rates may reduce our net income by increasing the cost of our debt without any corresponding increase in rents or cash flow from our securities. Changes in interest rates may also impact our net book value as our derivative instruments and debt investments are periodically marked-to-market through stockholders’ equity. Generally, we are exposed to loss on our fixed pay interest rate swaps and interest rate forward contracts to the extent interest rates decrease below their contractual fixed rate. Also, as interest rates increase, the value of our fixed rate debt investments generally decreases. The magnitude of the decrease is a function of the difference between the coupon rate and the current market rate of interest, the average life of the securities and the face amount of the securities. The relationship between spreads on debt investments and derivative instruments may vary from time to time, resulting in a net aggregate book value increase or decrease. Changes in the general level of interest rates also can affect our ability to acquire new investments and our ability to realize gains from the settlement of such assets. This excerpt taken from the AYR 10-Q filed Nov 17, 2008. Interest
Rate Risk
Interest rate risk is the exposure to loss resulting from
changes in the level of interest rates and the spread between
different interest rates. These risks are highly sensitive to
many factors, including U.S. monetary and tax policies,
U.S. and international economic factors and other factors
beyond our control. We are exposed to changes in the level of
interest rates and to changes in the relationship or spread
between interest rates. Our primary interest rate exposures
relate to our lease agreements, debt
Table of Contents
investments, floating rate debt obligations and interest rate
derivative instruments. Our lease agreements typically require
the payment of a fixed amount of rent during the term of the
lease. Similarly, our debt investments are predominately
collateralized by fixed rate aircraft leases, and provide for a
fixed coupon interest rate. However, our borrowing agreements
generally require payments based on a variable interest rate
index, such as LIBOR. Therefore, increases in interest rates may
reduce our net income by increasing the cost of our debt without
any corresponding increase in rents or cash flow from our
securities. We are also exposed to loss, and to margin calls, on
(i) our fixed-pay interest rate swaps to the extent
interest rates decrease below the contractual fixed rates of our
swaps and (ii) our other interest rate derivate instruments.
Changes in interest rates may also impact our net book value as
our debt investments and derivatives are periodically
marked-to-market through stockholders’ equity. Generally,
as interest rates increase the value of our fixed rate debt
investments decreases. The magnitude of the decrease is a
function of the difference between the coupon rate and the
current market rate of interest, the average life of the
securities and the face amount of the securities. We are also
exposed to loss on (i)our fixed pay interest rate swaps to the
extent interest rates decrease below the contractual fixed rates
of our swaps and (ii) our other derivative instruments. In
general, we would expect that over time, decreases in the value
of our debt investments attributable to interest rate changes
will be offset to some degree by increases in the value of our
derivative instruments, and vice versa. However, our policy is
to hedge only a portion of the variable rate interest payments
on our outstanding
and/or
expected future debt obligations rather than hedge the amount of
our investments; therefore, our assets remain partially
un-hedged. Furthermore, the relationship between spreads on debt
investments and spreads on derivative instruments may vary from
time to time, resulting in a net aggregate book value increase
or decrease. Changes in the general level of interest rates can
also affect our ability to acquire new investments and our
ability to realize gains from the settlement of such assets.
As of September 30, 2008, if interest rates were to
increase by 100 basis points, we would expect the annual
interest expense on our credit facilities to increase by
approximately $2.4 million on an annualized basis, net of
amounts received from our interest rate hedges.
This excerpt taken from the AYR 10-Q filed Aug 8, 2008. Interest
Rate Risk
Interest rate risk is the exposure to loss resulting from
changes in the level of interest rates and the spread between
different interest rates. These risks are highly sensitive to
many factors, including U.S. monetary and tax policies,
U.S. and international economic factors and other factors
beyond our control. We are exposed to changes in the level of
interest rates and to changes in the relationship or spread
between interest rates. Our primary interest rate exposures
relate to our lease agreements, debt investments, floating rate
debt obligations and interest rate derivative instruments. Our
lease agreements typically require the payment of a fixed amount
of rent during the term of the lease. Similarly, our debt
investments are predominately collateralized by fixed rate
aircraft leases, and provide for a fixed coupon interest rate.
However, our borrowing agreements generally require payments
based on a variable interest rate index, such as LIBOR.
Therefore, increases in interest rates may reduce our net income
by increasing the cost of our debt without any corresponding
increase in rents or cash flow from our securities. We are also
exposed to loss, and to margin calls, on (i) our fixed-pay
interest rate swaps to the extent interest rates decrease below
the contractual fixed rates of our swaps and (ii) our other
interest rate derivate instruments.
Changes in interest rates may also impact our net book value as
our debt investments and derivatives are periodically
marked-to-market through stockholders’ equity. Generally,
as interest rates increase the value of our fixed rate debt
investments decreases. The magnitude of the decrease is a
function of the difference between the coupon rate and the
current market rate of interest, the average life of the
securities and the face amount of the securities. We are also
exposed to loss on (i)our fixed pay interest rate swaps to the
extent interest rates decrease below the contractual fixed rates
of our swaps and (ii) our other derivative instruments. In
general, we would expect that over time, decreases in the value
of our debt investments attributable to interest rate changes
will be offset to some degree by increases in the value of our
derivative instruments, and vice versa. However, our policy is
to hedge only a portion of the variable rate interest payments
on our outstanding
and/or
expected future debt obligations rather than hedge the amount of
our investments; therefore, our assets remain partially
un-hedged. Furthermore, the relationship between spreads on debt
investments and spreads on derivative instruments may vary from
time to time, resulting in a net aggregate book value increase
or decrease. Changes in the general level of interest rates can
also affect our ability to acquire new investments and our
ability to realize gains from the settlement of such assets.
As of June 30, 2008, if interest rates were to increase by
100 basis points, we would expect the annual interest
expense on our credit facilities to increase by approximately
$2.2 million on an annualized basis, net of amounts
received from our interest rate hedges.
This excerpt taken from the AYR 8-K filed Sep 26, 2007. Interest Rate Risk Interest rate risk is the exposure to loss resulting from changes in the level of interest rates and the spread between different interest rates. These risks are highly sensitive to many factors, including U.S. monetary and tax policies, U.S. and international economic factors and other factors beyond our control. We are exposed to changes in the level of interest rates and to changes in the relationship or spread between interest rates. Our primary interest rate exposures relate to our lease agreements, debt investments, floating rate debt obligations and interest rate derivative instruments. Our lease agreements typically require the payment of a fixed amount of rent during the term of the lease. Similarly, our debt securities are predominately collateralized by fixed rate aircraft leases, and provide for a fixed coupon interest rate. However, our borrowing agreements generally require payments based on a variable interest rate index, such as LIBOR. Therefore, increases in interest rates may reduce our net income by increasing the cost of our debt without any corresponding increase in rents or cash flow from our securities. We are also exposed to loss on (i) our fixed-pay interest rate swaps to the extent interest rates decrease below the contractual fixed rates of our swaps and (ii) our other interest rate derivate instruments. Changes in interest rates may also impact our net book value as our debt securities and derivatives are periodically marked-to-market through stockholders’ equity. Generally, as interest rates increase the value of our fixed rate debt securities decreases. The magnitude of the decrease is a function of the difference between the coupon rate and the current market rate of interest, the average life of the securities and the face amount of the securities. We are also exposed to loss on (i) our fixed pay interest rate swaps to the extent interest rates decrease below the contractual fixed rates of our swaps and (ii) our other derivative instruments. In general, we would expect that over time, decreases in the value of our debt securities attributable to interest rate changes will be offset to some degree by increases in the value of our derivative instruments, and vice versa. However, our policy is to hedge only a portion of the variable rate interest payments on our outstanding and/or expected future debt obligations rather than hedge the amount of our investments, therefore, our assets remain partially un-hedged. Furthermore, the relationship between spreads on debt securities and spreads on derivative instruments may vary from time to time, resulting in a net aggregate book value increase or decline. Changes in the general level of interest rates also can affect our ability to acquire new investments and our ability to realize gains from the settlement of such assets. | EXCERPTS ON THIS PAGE:
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