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FX deal-contingent hedging for a PE-backed corporate
Case studies

FX deal-contingent hedging for a PE-backed corporate

Background
  • PE-backed UK corporate acquiring overseas business with a consideration payable in USD
  • Sources in the form of equity and debt, whereby part of the debt and the equity were denominated in GBP giving rise to FX risk between signing and closing on c . USD 50 m of the acquisition price
  • Deal was subject to regulatory approval which implied a low risk of the acquisition failing to complete
Our Approach
  • Outline and price several hedging strategies to deal with FX risk between signing and closing of the transaction
  • Structure deal-contingent forward (product of choice) and approach lending bank (among the top tier providers of deal contingent forwards) to test appetite
  • Run DD process with lending bank, negotiate pricing and terms of long – form confirmation for documenting the deal – contingent forward
  • Conduct live benchmarking during implementation of trade ensuring efficient, transparent pricing achieved
Benefits
  • Highly attractive pricing with a deal – contingent premium of less than 30 % of the at – the – money option for a sub USD 50 m trade
  • No break-cost and eliminated the chance of dead deal cost in the event the acquisition failed to complete
  • Flexible settlement mechanism allowed for the delivery of the contract at any date between the first and the long stop date at no additional cost
 

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Contact us

If you need hedging or debt advice or would like to speak about how we could help your business, please get in touch.