Throughout this report, the terms "Swapco" and "the
Company" refer to Salomon Swapco Inc.
"Salomon" refers to Salomon Inc, Swapco's ultimate
parent, or to any of its affiliates other than Swapco.
"SBHC" refers to Salomon Brothers Holding
Company Inc, Swapco's immediate parent.
"Salomon Brothers Inc" refers to Salomon Brothers
Inc, the U.S. broker-dealer affiliate of Swapco.
Copyright Salomon Swapco Inc
1996
All Rights Reserved.
Salomon Swapco Inc
To Our Clients
April 25, 1996
Swapco continued to experience strong growth
during the first quarter. Notional grew $19.5
billion over the quarter, or 17%, matching the rate
of growth we experienced last year. In absolute
terms, Swapco added $1.5 billion in notional per
week, a faster pace than we have experienced in
the past. Over the same period, the number of
outstanding trades grew to 2,108, an increase
matching the rate of notional growth.
At the same time, we were able to reduce Swapco
capital by declaring and paying a dividend of
$500 million on March 29. Our ability to declare
that dividend was the result of a combination of
factors that reduced Swapco's largest single credit
exposure. Market movements reduced the
exposure substantially. In addition, we purchased
credit insurance which left Swapco vulnerable
only to a simultaneous default of both its triple-A
rated counterparty as well as that counterparty's
triple-A rated insurers.
At March 31, Swapco's Stockholder's equity was
$228 million, down from the December 31
historical high of $666 million. Stockholder's
equity on our balance sheet, however, is not the
best measure of Swapco's capital adequacy. For
that purpose, Swapco had $296 million of capital
(or $297 million - depending upon which rating
agency's measure of capital adequacy we use)!
1
