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Hedging dual-currency refinancing
Case studies

Hedging dual-currency refinancing

Background
  • As part of a refinancing process, the company needed to pay down a substantial amount of GBP debt at closing
  • A private debt fund provided committed facilities in USD, but these were delivered as a mix of USD and GBP at closing, with the GBP amount being fixed prior to closing
  • The debt fund was not a hedging product provider
  • The company’s shareholders were concerned about GBP exchange rate volatility ahead of closing
  • The company had a shortfall of GBP and was planning to fund the remaining amount in USD with bank debt
  • The company wanted certainty over fund flows, as this would assist with bank negotiations and limit the impact of FX volatility on the refinancing
Our Approach
  • JCRA engaged with the shareholders and debt advisors to identify an accurate timeline for closing, their sensitivity to risk and their experience of similar transactions
  • JCRA provided detailed market information, including the trading costs associated with alternative hedging strategies and estimates of market risks in the event that the refinancing failed to complete
  • Together with the company, JCRA agreed transparent and competitive costs for the preferred strategy with the bank lenders
  • JCRA coordinated the execution and benchmarked pricing against the market to ensure charges were as agreed
Benefits
  • The company could assess its hedging alternatives on a like-for-like basis, including likely pricing, ahead of approaching their banks
  • The company was able to take an informed decision about the risks associated with FX forwards in the context of Brexit-related uncertainty
  • Negotiations between the relevant parties and the hedging bank were streamlined
  • The company avoided paying a substantial premium for vanilla options, and secured highly competitive trading terms with the hedge provider
  • The final hedging strategy was simpler and more appropriate than that which had originally been envisaged
 

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Contact us

If you need hedging or debt advice or would like to speak to the team, please get in touch.