- Castle Marinas Limited was in advanced discussions with potential lenders to refinance a portfolio of UK marinas and finance additional acquisitions.
- As the negotiations progressed it appeared likely the incumbent lender would be replaced and the existing interest rate hedge unwound.
- Previously Castle Marinas had used a swap to hedge its floating rate debt and, as interest rates had fallen, there was a break cost associated with unwinding the transaction.
- The preferred lender did not require the facility to be hedged but Castle Marinas wanted to protect against higher interest rates in the future.
- The facility included a Libor floor.
- Castle Marinas was keen to minimise its exposure to interest rate risk while retaining flexibility.
- JCRA worked closely with Castle Marinas in order to identify the most appropriate strategy being mindful of the Libor floor.
- We developed a solution that delivered the desired flexibility which was sensitive to concerns over future break costs.
- We engaged with the existing swap provider to ensure the costs associated with unwinding the existing transaction were in line with market conditions.
- Negotiated credit margins and execution spreads with the new lender to ensure they were in line with market conditions.
- JCRA produced a tailored report highlighting the benefits and consideration of available hedging strategies.
- Our recommendation fully incorporated Castle Marina’s requirements which included flexibility and known interest costs.
- At financial close, JCRA benchmarked the economic terms of both the unwind of the existing swap with the incumbent swap provider and the execution of the new strategy with the new lender.