New Accounting Guidance Won’t Always Be Easy

July 6, 2017 Chatham Financial

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“Almost every piece of corporate debt that gets negotiated today has a floor in it, and a lot of them are at 0%,” Mr. Gentzel said. “However, companies often enter into swaps with no floor to hedge debt that does have a floor, and that creates a mismatch. That’s ineffectiveness.” However, most companies don’t want to buy 0% floors in their swaps because it won’t provide them with any real protection in today’s rising rate environment.
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