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Exhibit 7

Summary of Five-year Eurobond Terms Available to R.J. Reynolds

Dollar
yen
Eurobonds Eurobonds
Face value
100
25,000
Price
100.125% 100.250%
Fees
1.875%
1.875%
Coupon (paid annually)
10.125%
6.375%
Final Redemption
100
25,000

Yen/Dollar
Dual
Currency
Eurobonds
25,000
101.500%
1.875%
7.750%
115.956 $

Exhibit 8
Long-dated Yen/Dollar Forward Exchange Rates (Forward Arranged by Nikko Securities)

Year
0
1
2
3
4
5

Outright Rates
Bid
Offer
236.80
236.90
231.30
231.70
223.90
225.90
215.60
218.70
207.10
211.20
197.60
202.70

% spread
0.04%
0.17%
0.89%
1.42%
1.94%
2.52%

Exhibit 9
Currency and Interest Rate Swap Indications (All rates are against six-month dollar LIBOR)

5-year Dollar Rates


5-year Yen Rates

Semiannual Quotation Benchmark


Pay
Receive US Treasury
T + 60
T + 76
9.88%

Semiannual Fixed Rates


Against 6-month Dollar
LIBOR
Pay
Receive
10.48%
10.64%
6.98%
7.22%

All in cost Calculation


Alternatif 1 : Eurodollar bonds
Year
0
1
2
3
4
5
All in cost

Cash Flows
98.25
-10.125
-10.125
-10.125
-10.125
-110.125
10.59%

Alternatif 2a : Euroyen hedged into Dollar by Forward Contract


Year
0

Yen CF
24,593.75

$ CF
103.81

RJR
buy $

Annual Fixed Rates


Against 6-Month Dollar
LIBOR
Pay
10.75%
7.10%

1
2
3
4
5
All in cost

-1,593.75
-1,593.75
-1,593.75
-1,593.75
-26,593.75
6.77%

-6.89
-7.12
-7.39
-7.70
-134.58

Sell $
Sell $
Sell $
Sell $
Sell $

10.64%

Alternatif 2b : Euroyen hedged into Dollar by Currency Swap


RJR receipts
From
Swaps flows with MGL
Year
euroyen bondYen
Dollar
Yen excess $ eq.
0
24,593.75 -24,258.82
102.40
334.93
1
-1,593.75
1,593.75
-11.18
2
-1,593.75
1,593.75
-11.18
3
-1,593.75
1,593.75
-11.18
4
-1,593.75
1,593.75
-11.18
5
-26,593.75
26,593.75
-113.58
All in cost

6.77%

7.10%

1.41

10.92%
10.92%

Alternative 3a : Dual Currency bond hedged into $ by Forward Contract

Year
0
1
2
3
4
5
All in cost

Dual Currency
Yen CF
Dollar CF Effective $ CF
24906.25
105.134
-1937.5
-8.377
-1937.5
-8.653
-1937.5
-8.987
-1937.5
-9.355
-1937.5
-115.956
-125.761
10.21%

Alternative 3b : Dual Currency bond hedged into $ by Interest Rate Swap


RJR receipts
Dual Currency
swap flows with MGL
Year
Yen CF
Dollar CF
Yen
Dollar
0
24906.25
-7,922.91
33.44
1
-1937.5
1937.5
-9.031
2
-1937.5
1937.5
-9.031
3
-1937.5
1937.5
-9.031
4
-1937.5
1937.5
-9.031
5
-1937.5
-115.956
1937.5
-9.031
All in cost

7.10%

10.92%

Yen excess
16983.34

Summary of Result

Alt 1
Alt 2a
Alt 2b
Alt 3a
Alt 3b

Dollar all in cost


Spread over
Annual
Semiannual benchmark
10.59%
10.33%
45
10.64%
10.37%
49
10.55%
10.29%
41
10.21%
9.96%
8
10.27%
10.02%
14

Annual Fixed Rates


Against 6-Month Dollar
LIBOR
Receive
10.92%
7.35%

Effective
Dollar flow
103.81
-11.18
-11.18
-11.18
-11.18
-113.58

Basis point conversion


Yen
Dollar
(1.3541) (1.3541)
-0.3311
-0.3656
-0.3311
-0.3656
-0.3311
-0.3656
-0.3311
-0.3656
-0.3311
-0.3656

Calculation of effective swap rates


Yen
Quoted swap rates
7.10%
Add
Yen basis points
Dollar basis points
Effective swap rates

10.55%

$ equiv.
71.69

7.10%

Effective
$ CF
105.13
-9.031
-9.031
-9.031
-9.031
-124.987
10.27%

10.92%

-0.33

6.77%

Dollar
10.92%

-0.37
10.55%