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Old 11-30-2007, 10:44 PM
Plateau Plateau is offline
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Join Date: Jul 2007
Posts: 13
Default Clarification of possible interest rate hedge in 10-K filing...

I am reading Whole Foods (WFMI) 10-k filing as I wanted to get a deeper understanding of their purchase of Wild Oats.I come arcross what seems like an interest rate hedge limiting Whole Foods exposure to increasing LIBOR rates. Is this common practice, why does Whole Foods in particular believe libor rates are going to rise?

"During fiscal year 2007, the Company entered into a $700 million, five-year term loan agreement to finance the acquisition of Wild Oats Markets. The loan bears interest at our option of the alternative base rate or the LIBOR rate plus an applicable margin, 1% as of September 30, 2007, based on the Company's Moody's and S&P rating. Our term loans do not give rise to significant fair value risk because they are variable interest rate loans with revolving maturities which reflect market changes to interest rates. Subsequent to the end of fiscal year 2007, the Company entered into a three-year interest rate swap agreement with a notional amount of $490 million to fix the interest rate at 5.718%, inclusive of the applicable margin and associated fees, to help manage our exposure to interest rate fluctuations"
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