Case Name :      Rothmans Inc. – The Curious Case of the Interest Rate Swap

Authors :           Karen Lightstone

Source :             Ivey Publishing

Case ID :            W12164

Discipline :        Accounting

Case Length :    07 pages

Solution Sample availability : YES

Plagiarism : NO (100% Original work)

This case provides an opportunity to evaluate the mechanics and effectiveness of an interest rate swap in an actual situation. Rothmans Inc. entered into an interest rate swap in 2001, and the company’s public financial statements allow readers to follow the swap through several years until the eventual early pay-off in 2005. Students can determine if the decision to exit the interest rate swap early was good or bad. Rothmans has only one five-year bank term loan and one interest rate swap covering half of the value of the loan. This simplicity provides an excellent learning environment using publicly available data.