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Interest rate risk of Tetra Technologies
Interest rate risk of Tetra Technologies
Tetra Technologies is under interest rate risk with respect to a portion of Firm's outstanding indebtedness.As of December 31, 2008, Firm's outstanding long-term debt ($97.4 mil) consists of floating rate loans, bearing interest at rate spread above LIBOR. Consequently, Firm's cash flows as well as results of operations are subject to interest rate risk exposure due to the level of the variable rate debt balance outstanding. The firm currently did not enter an interest rate swap contract or other derivative instrument for hedging exposure to interest rate fluctuation risk.

Any outstanding balances under the floating rate portion of Tetra`s bank credit facility are subject to market risk exposure related to changes in applicable interest rates. For the reason, it borrows funds suitable for Firm's bank credit facility which are necessary to fund its capital expenditure requirements as well as certain acquisitions. These instruments carry interest at an agreed-upon percentage rate spread above LIBOR which are balances based on floating rate debt outstanding. As of December 31, 2008 each increase of 100 basis points in the LIBOR rate would result in a decrease of earnings which is approximately USD O.6 million. The above stated table sets as of December 31 2008 and 2007 firm's cash flows for the long-term debt obligations outstanding principal balances (bearing a variable interest rate) and weighted average effective interest rates by their expected maturity dates.

Currently, the Firms have no party to an interest rate swap contract and any derivative instrument which are designed to interest rate fluctuation risk exposures hedging. If you want a deeper analysis of this problem you can purchase report online. Online paper writing services provide professional help with essays, absolute authenticity and prompt delivery.