To: Zeev Hed who wrote (23721 ) 1/12/2003 12:42:03 PM From: ild Respond to Zeev, all US economy is very leveraged on low short interest rates. Greenspan will not dare raise them.... Mr. Immelt actually seemed like a pretty nice guy – dressed in that Jimmy Carter sweater and all. But in addition to sticking up for his company and not “dissing” PIMCO, he said the following: “And so while, you know, a move into long-term debt will increase our funding costs slightly,…it has nothing to do with the spread between commercial paper and long-term debt because we swap into matching funds. So you know the incremental cost is de minimus.” De minimus? How could moving $11 billion from 1 3/4% commercial paper to 6 1/2% debt be “de minimus?” At first blush, it appears to be an annual increase in interest expense of about $500 million dollars, which as Everett Dirksen might have said is “real money.” But Immelt could be right if in fact they “swap” that long-term debt back into short-term floating rate paper - but only he and his Treasurer know that. This stuff is complicated folks, so I will go no further down this “swappy” trail other than to say that GE’s actual increase in interest expense might temporarily be limited to say $70 or 80 million not $500 million – if in fact they’re using interest rate swaps. pimco.com
