FY2016 CCDOA Financial Report as of 6302016.pdf - page 116

CLARK COUNTY DEPARTMENT OF AVIATION
CLARK COUNTY, NEVADA
Notes to Financial Statements
For the Fiscal Years Ended June 30, 2016 and 2015
103
Hedging Derivative Instruments - Net Cash Flows
For the Fiscal Year Ended June 30, 2016 (with Comparative Net Interest Payments for the Prior Fiscal Year)
Interest to
Interest Rate Swap
Associated
Bondholders (000)
Swap#
Description
Variable Rate Bonds
(Pay)
Receive
Net
(Pay)
2016
2015
07A Floating-to-Fixed 2008 A-2, 2011 B-1
(6,423)
$
610
$
(5,813)
$
(54)
$
(5,867)
$
(5,971)
$
07B Floating-to-Fixed 2008 B-2, 2011 B-2
(6,424)
608
(5,816)
(58)
(5,874)
(5,968)
10B Floating-to-Fixed 2008 D-2A, 2008 D-2B
(1,068)
249
(819)
(9)
(828)
(1,099)
10C Floating-to-Fixed 2008 D-2A, 2008 D-2B
(1,068)
249
(819)
(9)
(828)
(1,099)
12A Floating-to-Fixed 2008 D-2A, 2008 D-2B, 2008C, 2008 D-3, 2010 F-2 PFC
(11,252)
815
(10,437)
(65)
(10,502)
(10,610)
14A Floating-to-Fixed 2008 D-3, 2015 B
(2,838)
297
(2,541)
(5,732)
(8,273)
(6,965)
14B Floating-to-Fixed 2008 C, 2008 D-2A, 2008 D-2B, 2008A GO, 2010 F-2 PFC
(5,633)
590
(5,043)
(52)
(5,095)
(5,190)
(34,706)
$
3,418
$
(31,288)
$
(5,979)
$
(37,267)
$
(36,902)
$
Counterparty Swap Interest (000)
Net Interest Payments (000)
Credit Risk
The Department is exposed to credit risk in the amount of the hedging derivatives’ positive fair
values. Since one of the hedging derivatives had a positive fair value as of June 30, 2016, the
Department was exposed to credit risk for this derivative. Nonetheless, as described earlier, a
CSA is in place to provide collateral to protect the value of the swaps under specific
circumstances. The counterparty credit ratings for the Department’s hedging derivative
instruments at June 30, 2016, are included in the table below.
Credit Risk
Interest Rate Swap
Exposure
Swap#
Description
Counterparty
Moody's
S&P
Moody's
S&P Fitch
(000)
07A Floating-to-Fixed
JPMorgan Chase Bank, N.A.
Baa1
BBB+
Aa3
A+ AA-
-
$
07B Floating-to-Fixed
UBS AG
Baa1
BBB+
A1
A A
-
10B Floating-to-Fixed
JPMorgan Chase Bank, N.A.
Baa1
BBB+
Aa3
A+ AA-
-
10C Floating-to-Fixed
UBS AG
Baa1
BBB+
A1
A A
-
12A Floating-to-Fixed
Citigroup Financial Products Inc.
Baa1
BBB+
Baa1 BBB+ A
884
14A Floating-to-Fixed
UBS AG
Baa1
BBB+
A1
A A
-
14B Floating-to-Fixed
Citibank, N.A., New York
Baa1
BBB+
A1
A A+
-
884
$
Counterparty Threshold Ratings
Counterparty Ratings
As of June 30, 2016, the counterparty to swap #12A was required to post collateral pursuant to
the terms of the ISDA CSA Agreement. The credit rating of this counterparty declined to the
rating threshold as defined in the ISDA CSA Agreement so the counterparty is required to post
collateral. The Department is negotiating with the counterparty on posting collateral.
Basis and Interest Rate Risk
All the hedging derivative swaps are subject to basis risk and interest rate risk should the
relationship between the LIBOR rate and the Department's bond rates converge. If a change
occurs that results in the rates moving to convergence, the expected cost savings and
expected cash flows of the swaps may not be realized.
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