MARTA manages derivative portfolio risk through use of an independent valuation and monitoring service
EDEN PRAIRIE, Minn.--(BUSINESS WIRE via COLLEGIATE PRESSWIRE)--Apr 11, 2005--DerivActiv, LLC, announced today that the Metropolitan Atlanta Transit Authority (''MARTA'') is using DerivActiv`s web-based derivative mark-to-market services to help them monitor their interest rate swaps on a daily basis.
Safety is a passion for MARTA as reflected in its stellar record of being voted the safest system in the USA 18 times over the past 23 years. Every MARTA department practices this commitment to safety, including the Finance Department, which is using DerivActiv`s independent derivative monitoring service to track the value and risk exposure of its more than $700 million in basis swaps.
The decision to use an independent derivative mark-to-market service was an easy one for MARTA since Standard & Poor`s rating agency strongly recommended it and it helped to satisfy the concerns of the Board of Directors before agreeing to enter into the swap agreements. ''Convincing our Board that we should be using derivatives was challenging because they know there are risks associated with these instruments. We told them that we were going to have a professional, independent, external monitoring service tracking the swaps` performance, and that gave them comfort that the risks were going to be managed,'' said MARTA`s Chief Financial Officer, Richard McCrillis.
MARTA uses DerivActiv to determine daily swap valuations, to check the accuracy of counterparty calculations, to identify opportunities in their trades as they move forward, and to report the ''fair value'' of their derivatives on periodic financial statements. Using DerivActiv gives MARTA rapid web access to independent and accurate mid-market values any time they want to review or make changes to their derivative portfolio. ''DerivActiv is staffed with swap experts, so I know their valuation numbers are correct,'' says Richard Marsh, Manager of Financial Planning & Analysis for MARTA, ''and we like the convenience of being able to pop-up the DerivActiv screen whenever we want to see our current swap valuations.''
MARTA also uses DerivActiv`s e-mail threshold alerts to receive an early warning of trends or events that could affect collateral positions and to allow the finance staff to better manage the collateral and credit rating risk of their derivatives portfolio. This management of risk is particularly important to the credit rating agencies, which have started to view derivatives as part of the overall rating. S&P; has incorporated derivatives into its rating criteria using a Debt Derivative Profile or DDP scoring method that assigns scores ranging from 1 to 5, with 1 representing the lowest risk and 5 representing the highest risk. ''MARTA is ahead of the curve in understanding the value of independent swap monitoring to their bond holders, board of directors, auditors, and the rating agencies,'' says Johan Rosenberg, DerivActiv`s President and CEO. He went on to say, ''Clearly, there is a trend developing -- as more issuers are using derivatives as hedges, more issuers will need to validate the information they are using on their financial statements. Sarbanes-Oxley created a new standard for corporate responsibility and greater scrutiny of derivatives, and DerivActiv fills the void for treasurers that do not have the same systems as the investment banks have to value their derivatives and manage their exposures.''
About DerivActiv, LLC
DerivActiv, LLC (www.derivactiv.com) is the leading provider of web-based derivative valuation and monitoring services. As an independent service provider, DerivActiv is not affiliated with any individual bank, dealer, or financial product. Founded in 2004 by veteran derivative and finance advisors, DerivActiv is the only firm of its kind to provide accurate daily mid-market valuations for derivative instruments. DerivActiv sells a low-cost, full-service subscription that provides derivative users with critical information to help them validate their counterparties` calculations, monitor market and counterparty changes that impact their derivative positions, and determine the value of their hedges for FAS 133 / GASB compliance. For more information please call 1-866-200-9012.
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