Replies to post #32167 on Abet Chichi2 (Chichi2)

[Ayock]

reprint on LIBOR experience

http://investorshub.advfn.com/boards/read_msg.aspx?message_id=32596878

Under the radar implications of LIBOR jump.

I'm not hearing much yet about the companies whos day to day workings are tied to and fluxuate under the direct umbrella of LIBOR.

I have personal experience as CEO of a group of closely held compainies. We had $50 millions to $100+ millions in revenues and +/- $75 millions in direct LIBOR based loans eminating from a northern European bank. This hands on gives me some insight in the LIBOR links. We were operating under several stand alone loan packages and with several tranches within those loans. The long term loans were in US$ and priced at LIBOR plus ~ 2 1/4%. These reset quarterly.

Here's the kicker: We had US$6 Million to US$10 Million in working capital...usually near fully drawn. All priced at LIBOR plus margin range ~+/- 2 3/8. The current LIBOR huge increases is tantamount to the Mortgage ARM resets in it's instant and huge jump in unavoidable costs to business. Businesses already have this money and now will be required to pay what is looking like a 200% - 300% increase in interest costs for money already drawn. Way outside any reasonable budgeted costs.

So 2 things...1. Clearly, based on LIBOR, banks just don't want to loan MORE money. and 2. They already have lots of accounts with money already drawn with adjustable interest exposure. There is the potential that whoever is in this circumstance will get seriously wacked by interest costs to a point that could begin to tip over (ala real estate collapse) non banking firms highly leveraged or living on the margin.

Just something to pay attention to in the fine print details going forward if LIBOR remains anywhere near these levels.