Why does CFC have foreign-currency hedges?
The cross-currency interest-rate exchange agreements are used to synthetically change CFC’s foreign-denominated debt to U.S. dollar-denominated debt. In addition, the agreements synthetically change the interest rate from the fixed rate on the foreign denominated debt to variable-rate U.S. dollar-denominated debt or from a variable rate on the foreign-denominated debt to a different variable rate. As of Aug. 31, 2004 and May 31, 2004, CFC was party to $434 million of cross-currency interest-rate exchange agreements under which CFC receives euros and pays U.S. dollars, and $282 million, under which CFC receives Australian dollars and pays U.S. dollars.
