Short Term Liquidity vs LongShort Term Liquidity vs. Long Term Capital Needs

Laurie CampbellManaging Director – Debt Capital Markets

Bank of America Merrill Lynch

9 %10Y A Industrial Corporate Yields 3MO A1/P1 CP Rates

Both Short Term and Long Term Funding Rates Are At Historical Lows

7 %

8 %

10Y A Industrial Corporate Yields 3MO A1/P1 CP Rates10Y A Industrial Average 3MO A1/P1 CP Average

5 %

6 %

Yiel

ds

2 %

3 %

4 %Y

0 %

1 %

2 %

Apr-98 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10

Year1

6 %

But The Cost Of Extending Out The Yield Curve Is Expensive

4 %

5 %

Spread Differential Average Spread Differential

3 %

4 %

Yiel

ds

1 %

2 %

-1 %

0 %Apr-98 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10

Year

2

9 %

However, When The Curve Is Flat, Rates Are Typically Higher

7 %

8 %10Y A Industrial Corporate Yields Spread Differential

4 %

5 %

6 %

Yiel

ds

2 %

3 %

-1 %

0 %

1 %

Apr-98 Apr-99 Apr-00 Apr-01 Apr-02 Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10

Year

3

375 bps

Drawn Spreads – IG Facilities

The Cost of Bank Debt Has Increased…

236225 bps

300 bps

0 bps

75 bps

150 bps

Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10

A BBB

186

p g p g p

Historical Rates and Yields

5%

6%

____________________(1) A, A- and BBB+ pricing based on 364-day facilities. BBB and BBB- pricing based on multi-year facilities.

1%

2%

3%

4%

0%Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10

3M LIBOR BBB MY Loan Yield 10 Year 3M LIBOR Average 4

450 bps

… Relative to 5-Year Bond Funding

5Y BBB Industrials Index - 5Y US Swap

350 bps

400 bps

200 bps

250 bps

300 bps LIBOR Equivalent

100 bps

150 bps

200 bps

0 bps

50 bps

Apr-98 Mar-99 Feb-00 Jan-01 Dec-01 Nov-02 Oct-03 Sep-04 Aug-05 Jul-06 Jun-07 May-08 Apr-09 Mar-10p p g y p____________________Note: Compares historical 5 year swap rates (cost of fixed-rate funding) to an annualized forward-looking moving average of realized 3 month LIBOR

(cost of floating-rate funding). The differences, charted by the colored bars, represent the per annum savings of entering into a 5 year fixed-to-floating swap at each point in time. If net savings are between -10 and 10bp, they are determined to be “Neutral”.

Source: Bloomberg, BAML 5

14 %

It Has Paid To Swap Fixed Rate Debt To Floating – Except When The Yield Curve Is Steep

10 %

12 %

4 %

6 %

8 %

0 %

2 %

-2 %

Net Saving Net Neutral Net Loss

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

3m USD Swap Rate 5y USD Swap Rate3m USD Swap Rate3m USD Swap Rate 5y USD Swap Rate5y USD Swap Rate

4

____________________Note: Compares historical 5 year swap rates (cost of fixed-rate funding) to an annualized forward-looking moving average of realized 3 month LIBOR

(cost of floating-rate funding). The differences, charted by the colored bars, represent the per annum savings of entering into a 5 year fixed-to-floating swap at each point in time. If net savings are between -10 and 10bp, they are determined to be “Neutral”.

Source: Bloomberg, BAML 6

General Session – Liquidity vsGeneral Session – Liquidity vs. Long Term Capital Needs

Stan PasternakSenior Vice President and Treasurer

Canadian Tire Corporation, Limited

Canadian Tire Corporation, LimitedP i i ll l h di t il (479 t C d• Principally a general merchandise retailer (479 stores across Canada –operated by Dealers). Market leader in Automotive, Home & Leisure

• Automotive includes 272 gasoline bars, 87 PartSource stores• Canadian Tire Financial Services offers credit card personal loans lines of• Canadian Tire Financial Services offers credit card, personal loans, lines of

credit, insurance and warranty products, funded by GIC’s, savings accounts and securitization. About 5MM cardholders, $4 Billion+ in card receivables

• Mark’s Work Wearhouse- retailer of industrial, casual apparel and footwear , pp– 378 stores in Canada

• Consolidated sales $10B, EBITDA $873 MM, earnings of $335MM, year end cash approximately $800MM

• Publically listed on TSE, rated BBB(high) by S & P• Weathered the economic challenges of 2008/2009 reasonably well

7

Canadian Tire Corporation, LimitedK Fi i lKey Financials• Market cap of $4.5B, LTD $1.4B (going to $1.1B), term deposits $1.2 B,

shorter term deposits $.9B• Easy access (currently) to CP (up to $800MM) Corporate MTN’s• Easy access (currently) to CP (up to $800MM) Corporate MTN s,

securitization (CP, Term and Conduits), committed bank lines $1.2B (unutilized)

• Fix approximately 75% debt, maintain cash liquidity at F.S. (bank) at pp y , q y ( )conservative level, traditional bank asset/liability management. Match term of corporate debt to expected life of asset (principally real estate)

• Have significant U.S. dollar exposure which is hedged proactively• Have precise financial policies for FX, interest rate, key credit metrics,

capital structure• Use derivatives to manage FX, interest rate and equity exposures

8

Capital StructureLaura B. Smith

Vice President and TreasurerPlum Creek Timber Company

Plum Creek - Diversified Land and Timber CompanyTimber Company

7 million acres

•Timber•Land & Real Estate•Natural ResourcesM f t i•Manufacturing

9

Plum Creek Capital Structure as of 3/31/10

Principal Average Averagec pa e age e age(millions) Rate Maturity

Private Placements 575 7.3% 2.2 yearsPublic Bonds 458 5.9% 5.6 yearsBank (Revolver & Term) 920$ 0 9% 2 2 years

$1,058

Bank (Revolver & Term) 920$ 0.9% 2.2 years

Total Debt 1,954$ 3.9% 2.8 yearsLess Cash & Discount (310)

N t D bt 1 644$

$603

$461

$603

$461

Net Debt 1,644$

> 53% Fixed and 47% Floating (37% Net of Cash)

> Ratings: BBB- (S&P) and Baa3 (Moody's), both positive outlook

> Bond rates near historical lows, but short term use of proceeds dilutive to earnings > Borrow long-term at 5.8% and repay short-term at 1.5%

$3

10

Capital StructureAnita M Prasad

General Manager, Treasury Capital ManagementMicrosoft Corporation

Debt Maturity Schedule

6.0%$4.50

4 20%

5.20%

4 0%

5.0%

$3 00

$3.50

$4.00

Total Cash $46BTotal Debt $6B

2.95%

4.20%

3.0%

4.0%

$2.00

$2.50

$3.00 Total Debt $6BDebt/Cash 13%Interest Coverage 193D bt/EBITDA 0 1

1.0%

2.0%

$0 50

$1.00

$1.50 Debt/EBITDA 0.1x

0.25%

0.0%$0.00

$0.50

CP 8/2010 6/2014 (5yr) 6/2019 (10yr) 6/2039 (30yr)

($B

)

Maturity

13

Performance of Commercial Paper

A1/P1 CP IndexA1/P1 CP Index

MSFT Q2MSFT Q2

14

Performance of Bonds

IPO (5/11/09)

Current (5/13/10)(5/11/09) (5/13/10)

5 Year MSFT Yield 3.0% 2.1%UST 2.0% 2.2%S d (b ) 9 (12)Spread (bps) 95 (12)

10 Year MSFT Yield 4.2% 3.6%UST 3.2% 3.5%Spread (bps) 105 8

30 Year MSFT Yield 5.2% 5.0%UST 4 2% 4 4%UST 4.2% 4.4%Spread (bps) 105 60

15

A diAppendix

Rates Forecasted to Move up From Current Historic LowsCurrent Historic Lows

Treasury Yields Near All-Time LowsYield Curve Flattening and Move Up Anticipated

5-Year UST

4.00

4.50

5.00

5 Year UST

Higher 96% of the time since 1990

2.50

3.00

3.50

d (%

)0.0 1.3 2.5 3.8 5.0 6.3 7.5 8.8 10.0

1.00

1.50

2.00Yiel

Current U.S. TreasuryYield Curve

Year-end F'casted U.S.

Higher 94% of the time since 1990

10-Year UST

0.00

0.50

3mo 23 5 7 10 15 20 25 30

Treasury Yield Curve

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.011.0

16

Liquidity AnalysisExample of simulations

"Red light" expenditures

"Orange light" expendituresHow do we model

liquidity risk?

Definition: Required expenditures which imply bankruptcy if missedImpact: Fund at any cost, including equity issuance

Definition: Important expenditures that are "painful" to business if missedImpact: Fund using incremental leverage and/or repatriation of offshore cash

Definition: Desired discretionary expenditures that would not be funded externally

p

"Green light" expenditures

Scenario 1: base case

Scenario 2What scenarios have

we evaluated?

Definition: Desired discretionary expenditures that would not be funded externallyImpact: Fund with excess cash if available

No access to capital markets; no repatriation of offshore cash

No access to capital markets; allow repatriation of offshore cash to make red/orange light payments

Scenario 3

Scenario 1 Scenario 2 Scenario 3

Income taxes, interest payments, and i i l t iti

Allow incremental debt issuance and repatriation of offshore cash to make red/orange light payments

we evaluated? red/orange light payments

principal maturities

Capital expenditures / R&D

Common dividends

M&A

How are cash flow needs modeled?

M&A

Maintain target excess cash balance

Share repurchases

17