Method, software program, and system for managing debt

• US 8,266,034 B1
• Filed: 05/12/2008
• Issued: 09/11/2012
• Est. Priority Date: 11/28/2000
• Status: Expired due to Term

• Current Assignee: Goldman Sachs & Company (Goldman Sachs Group Incorporated)
• Original Assignee: Goldman Sachs & Company (Goldman Sachs Group Incorporated)
• Inventors: Butcher, George H. III
• Primary Examiner(s): Kalinowski, Alexander
• Assistant Examiner(s): Graham, Clement B
• Application Number:
  US12/119,227
• Time in Patent Office: 1,583 Days
• Field of Search: 705 35- 38, 702 35- 38
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 20/10 specially adapted for electronic funds transfer [EFT] systems; specially adapted for home banking systems
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/03 Credit; Loans; Processing thereof
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/12 Accounting

Abstract

In one embodiment, a method for managing variable rate debt in the form of at least one credit issued by a borrower, comprising: budgeting for interest owed on the variable rate debt by the borrower during a time period when an interest rate on the variable rate debt is below a first predetermined low interest rate level; applying at least a portion of any existing current budgetary excess by the borrower to reduce future interest rate risk by performing at least one of i) the early retirement of principal associated with the variable rate debt and ii) the funding of a sinking fund; and applying at least a portion of any accumulated budgetary excess by the borrower during a time period when the interest rate is above a first predetermined high interest rate level to reduce an amount of debt service. A corresponding software program and system are also disclosed.

Claims

1. A processor-implemented method for managing variable rate debt comprising:

receiving, by a processor, information relating to the variable rate debt of a borrower;

determining, by the processor, based on the received information, a budget for interest owed on the variable rate debt to be applied by the borrower during a time period when an interest rate on the variable rate debt is below a first predetermined low interest rate level;

calculating by the processor, a value of at least a portion of any existing current budgetary excess to be applied by the borrower to reduce future interest rate risk by performing at least one of i) the early retirement of principal associated with the variable rate debt and ii) the funding of a sinking fund;

calculating by the processor, a value of at least a portion of any accumulated budgetary excess; and

transferring, by the processor, to the borrower, of the calculated value for the borrower to apply during a time period when the interest rate is above a first predetermined high interest rate level to reduce an amount of debt service.

2. The method of claim 1, further comprising the step of extending a principal amortization period associated with the variable rate debt by the borrower to maintain the amount of debt service below a predetermined debt service level during the time period when the interest rate is above a second predetermined high interest rate level and the impact of the performance of at least one of i) the early retirement of principal and ii) the application to principle and interest of amounts available in the sinking fund is not sufficient to avoid an increase in the amount of debt service above the predetermined debt service level, wherein the first predetermined high interest rate level and second predetermined high interest rate level are selected from the group of i) different levels and ii) the same levels.

3. The method of claim 1, further comprising the step of reducing a principal amortization period associated with the variable rate debt by the borrower during the time period when the interest rate is below a second predetermined low interest rate level, wherein the first predetermined low interest rate level and second predetermined low interest rate level are selected from the group of i) different levels and ii) the same levels.

4. The method of claim 1, wherein the existing current budgetary excess includes budgetary excess this year, this quarter, this month, or this week.

5. The method of claim 1, wherein the accumulated budgetary excess includes budgetary excess accumulated last year, last quarter, last month, or last week.

6. A processor-readable medium storing a plurality of processing instructions for managing variable rate debt, comprising issuable instructions by a processor to:

calculate a budget for interest owed on the variable rate debt during a time period when an interest rate on the variable rate debt is below a first predetermined low interest rate level;

calculate a value of at least a portion of any existing current budgetary excess to be applied to reduce future interest rate risk by performing at least one of i) the early retirement of principal associated with the variable rate debt and the funding of a sinking fund; and

calculate a value of at least a portion of any accumulated budgetary excess to be applied during a time period when the interest rate is above a first predetermined high interest rate level to reduce an amount of debt service.

7. The processor-readable medium storing a plurality of processing instructions of claim 6, further comprising issuable instructions by a processor to calculate an extension to a principal amortization period associated with the variable rate debt to maintain the amount of debt service below a predetermined debt service level during the time period when the interest rate is above a second predetermined high interest rate level and the impact of the performance of at least one of i) the early retirement of principal and ii) the application to principle and interest of amounts available in the sinking fund is not sufficient to avoid an increase in the amount of debt service above the predetermined debt service level, wherein the first predetermined high interest rate level and second predetermined high interest rate level are selected from the group of i) different levels and ii) the same levels.

8. A system for managing variable rate debt comprising:

a memory; and

a processor disposed in communication with said memory, and configured to issue a plurality of processing instructions stored in the memory, wherein the processor issues instructions to;

calculate a budget for interest owed on the variable rate debt during a time period when an interest rate on the variable rate debt is below a first predetermined low interest rate level;

calculate a value of at least a portion of any existing current budgetary excess to be applied to reduce future interest rate risk by performing at least one of i) the early retirement of principal associated with the variable rate debt and ii) the funding of a sinking fund; and

calculate a value of at least a portion of any accumulated budgetary excess to be applied during a time period when the interest rate is above a first predetermined high interest rate level to reduce an amount of debt service.

9. The system of claim 8, wherein the software program further comprises principal amortization extension calculation means for calculating an extension to a principal amortization period associated with the variable rate debt to maintain the amount of debt service below a predetermined debt service level during the time period when the interest rate is above a second predetermined high interest rate level and the impact of the performance of at least one of i) the early retirement of principal and ii) the application to principle and interest of amounts available in the sinking fund is not sufficient to avoid an increase in the amount of debt service above the predetermined debt service level, wherein the first predetermined high interest rate level and second predetermined high interest rate level are selected from the group of i) different levels and ii) the same levels.

10. A processor-implemented method for managing debt created by an issuer using an interest rate swap in which the issuer makes a fixed rate payment and receives a variable rate payment that at least partially offsets an interest payment on a variable rate bond issued by the issuer comprising:

receiving by a processor, information relating to the variable rate debt of a borrower;

determining by the processor, a budget amount by the issuer to cover the fixed rate payment, wherein the budgeted amount is higher than the amount of the fixed rate payment;

calculating by the processor, a value of at least a portion of any current budgetary excess by the issuer resulting from the receipt of the variable rate payment at a level that produces a payment higher than the interest payment on the variable rate bond to perform at least one of i) the early retirement of principal associated with the synthetic fixed rate debt and ii) the funding of a sinking fund; and

calculating by the processor, a value of at least a portion of any funds in the sinking fund to be applied to the interest payment on the variable rate bond if the interest payment on the variable rate bond increases above a predetermined high interest rate level to reduce an amount of debt services associated with the variable rate bond.

11. The method of claim 10, further comprising the step of extending a principal amortization period by the issuer associated with the variable rate bond when the variable rate payment received by the issuer is less than the interest payment on the variable rate bond.

12. The method of claim 10, further comprising,

reducing a principal amortization period associated with the variable rate bond when the variable rate payment received by the issuer exceeds the interest payment on the variable rate bond.

13. A processor-implemented method for managing variable rate debt comprising:

receiving, by a processor, information relating to the variable rate debt of a borrower;

executing, by the processor, a first requirement from a plurality of requirements included in at least one legal or financial instrument associated with the variable rate debt, the first requirement requiring the borrower to budget for interest owed on the variable rate debt during a time period when an interest rate on the variable rate debt is below a first predetermined low interest rate level to produce a current budgetary excess;

executing, by the processor, a second requirement from the plurality of requirements, the second requirement requiring the borrower to apply at least a portion of a current budgetary excess to reduce future interest rate risk by performing at least one of i) the early retirement of principal associated with the variable rate debt and the funding of a sinking fund; and

executing, by the processor, a third requirement from the plurality of requirements, the third requirement requiring the borrower to apply at least a portion of any accumulated budgetary excess during a time period when the interest rate is above a first predetermined high interest rate level to reduce an amount of debt service associated with the variable rate debt.

14. The method of claim 13, further comprising executing a requirement from the plurality of requirements that at least a portion of any accumulated funds in the sinking fund be applied by the borrower during the time period when the interest rate is above the first predetermined high interest rate level to reduce the amount of debt service associated with the variable rate debt.

15. A processor-implemented method for managing variable rate debt comprising:

receiving, by a processor, information relating to the variable rate debt of a borrower;

determining, by the processor, based on the received information, a budget for interest owed on the variable rate debt to be applied by the borrower during a time period when an interest rate on the variable rate debt is below a first predetermined low interest rate level;

calculating by the processor, a value of at least a portion of any existing current budgetary excess to be applied by the borrower to reduce future interest rate risk by performing at least one of i) the early retirement of principal associated with the variable rate debt and ii) the funding of a sinking fund;

calculating by the processor, a value of at least a portion of any accumulated budgetary excess;

extending a principal amortization period associated with the variable rate debt by the borrower to maintain the amount of debt service below a predetermined debt service level during the time period when the interest rate is above a second predetermined high interest rate level and the impact of the performance of at least one of i) the early retirement of principal and ii) the application to principle and interest of amounts available in the sinking fund is not sufficient to avoid an increase in the amount of debt service above the predetermined debt service level, wherein the first predetermined high interest rate level and second predetermined high interest rate level are selected from the group of i) different levels and ii) the same levels;

reducing a principal amortization period associated with the variable rate debt by the borrower during the time period when the interest rate is below a second predetermined low interest rate level, wherein the first predetermined low interest rate level and second predetermined low interest rate level are selected from the group of i) different levels and ii) the same levels; and

transferring, by the processor, to the borrower, of the calculated value for the borrower to apply during a time period when the interest rate is above a first predetermined high interest rate level to reduce an amount of debt service.