DELPHI 2014 Annual Report Download - page 84

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62
Commodity Price Risk
Commodity swaps/average rate forward contracts are executed to offset a portion of our exposure to the potential change
in prices mainly for various non-ferrous metals used in the manufacturing of automotive components. The net fair value of our
contracts was a liability of approximately $27 million and approximately $8 million at December 31, 2014 and 2013,
respectively. If the price of the commodities that are being hedged by our commodity swaps/average rate forward contracts
changed adversely or favorably by 10%, the fair value of our commodity swaps/average rate forward contracts would decrease
or increase by $35 million and $33 million at December 31, 2014 and 2013, respectively. A 10% change in the net fair value
liability differs from a 10% change in rates on fair value due to the relative differences between the underlying commodity
prices and the prices in place in our commodity swaps/average rate forward contracts. These amounts exclude the offsetting
impact of the price risk inherent in the physical purchase of the underlying commodities.
Interest Rate Risk
Our exposure to market risk associated with changes in interest rates relates primarily to our debt obligations. As of
December 31, 2014, we had approximately $400 million of floating rate debt principally related to the Credit Agreement. The
Credit Agreement carries an interest rate, at our option, of either (a) the ABR plus 0.25% per annum, or (b) LIBOR plus
1.00% per annum.
The interest rate period with respect to the LIBOR interest rate option can be set at one-, two-, three-, or six-months as
selected by us in accordance with the terms of the Credit Agreement (or other period as may be agreed by the applicable
lenders), but payable no less than quarterly. We may elect to change the selected interest rate over the term of the Credit
Facilities in accordance with the provisions of the Credit Agreement. The applicable interest rates listed above for the
Revolving Credit Facility and the Tranche A Term Loan may increase or decrease from time to time in increments of 0.25% to
0.50%, up to a maximum of 1.0% based on changes to our corporate credit ratings. Accordingly, the interest rate will fluctuate
during the term of the Credit Agreement based on changes in the Alternate Base Rate, LIBOR or future changes in our
corporate credit ratings.
The table below indicates interest rate sensitivity on interest expense to floating rate debt based on amounts outstanding
as of December 31, 2014.
Tranche A Term Loan
Change in Rate (impact to annual interest
expense, in millions)
25 bps decrease....................................................................................................................................... - $1
25 bps increase........................................................................................................................................ +$1