FY2016 CCDOA Financial Report as of 6302016.pdf - page 108

Notes to Financial Statements
For the Fiscal Years Ended June 30, 2016 and 2015
With regard to credit risk, potential exposure is mitigated through the use of an ISDA credit
support annex ("CSA"). Under the terms of master agreements between the Department and
the swap counterparties, each swap counterparty is required to post collateral with a third
party when the counterparty's credit rating falls below the trigger level defined in each master
agreement. This protects the Department from credit risks inherent in the swap agreements. As
long as the Department retains insurance, the Department is not required to post any
collateral; only the counterparties are required to post collateral. However, as of June 30, 2015,
none of the counterparties are required to post collateral.
As of June 30, 2016, the counterparty's credit ratings declined to the respective rating
thresholds as defined in the ISDA CSA agreement for swaps #12A and #18, and the
counterparty is required to post collateral. The Department and the counterparty negotiated
terms for swap #18 and on August 9, 2016, both the counterparty and the Department agreed
to terms with the Bank of New York Mellon under a Collateral Account Control Agreement
where Bank of New York Mellon would act as the custodian of the collateral. On August 10,
2016, the Department posted its demand to the counterparty for the collateral under the ISDA
CSA. On August 11, 2016, the counterparty posted $39.9 million of cash as collateral with the
custodian. The Department is negotiating with the counterparty to post collateral for swap
#12A. See Note 17, "Subsequent Events," for further details.
As summarized in the table below, the initial notional amounts of all active swaps as of June 30,
2016, totaled $1,908.0 million and remained unchanged from June 30, 2015, as did the number
of outstanding swap agreements, which remained at 18. The outstanding notional total as of
June 30, 2016, was $1,471.2 million and comprised $1,048.8 million in floating-to-fixed swaps,
$240.8 million in fixed-to-fixed swaps, and $181.5 million in basis swaps.
1...,98,99,100,101,102,103,104,105,106,107 109,110,111,112,113,114,115,116,117,118,...169
Powered by FlippingBook