x
_thumbnail_id: Array
author: Array
_author: Array
article_modules: Array
_article_modules: Array
modules_0_title: Array
_modules_0_title: Array
modules_0_content: Array
_modules_0_content: Array
modules: Array
_modules: Array
modules_2_download_box_download_box_title: Array
_modules_2_download_box_download_box_title: Array
modules_2_download_box_download_box_button_text: Array
_modules_2_download_box_download_box_button_text: Array
modules_2_download_box_download_box_button_url: Array
_modules_2_download_box_download_box_button_url: Array
modules_1_title: Array
_modules_1_title: Array
modules_1_content: Array
_modules_1_content: Array
modules_1_download_box_download_box_title: Array
_modules_1_download_box_download_box_title: Array
modules_1_download_box_download_box_button_text: Array
_modules_1_download_box_download_box_button_text: Array
modules_1_download_box_download_box_button_type: Array
_modules_1_download_box_download_box_button_type: Array
modules_1_download_box_download_box_button_url: Array
_modules_1_download_box_download_box_button_url: Array
modules_1_download_box: Array
_modules_1_download_box: Array
modules_2_quote_author: Array
_modules_2_quote_author: Array
modules_2_enable_tweet: Array
_modules_2_enable_tweet: Array
modules_2_quote: Array
_modules_2_quote: Array
modules_3_title: Array
_modules_3_title: Array
modules_3_content: Array
_modules_3_content: Array
modules_4_title: Array
_modules_4_title: Array
modules_4_content: Array
_modules_4_content: Array
modules_5_background_image: Array
_modules_5_background_image: Array
modules_5_video_title: Array
_modules_5_video_title: Array
modules_5_video_thumbnail_url: Array
_modules_5_video_thumbnail_url: Array
modules_5_video_url: Array
_modules_5_video_url: Array
modules_5_video_duration: Array
_modules_5_video_duration: Array
modules_5_video_description: Array
_modules_5_video_description: Array
modules_5_video_embed_code: Array
_modules_5_video_embed_code: Array
modules_6_title: Array
_modules_6_title: Array
modules_6_content: Array
_modules_6_content: Array
modules_5_image_caption: Array
_modules_5_image_caption: Array
_yoast_wpseo_content_score: Array
article_modules_1_download_box_download_box_title: Array
_article_modules_1_download_box_download_box_title: Array
article_modules_1_download_box_download_box_button_text: Array
_article_modules_1_download_box_download_box_button_text: Array
article_modules_1_download_box_download_box_button_type: Array
_article_modules_1_download_box_download_box_button_type: Array
article_modules_1_download_box_download_box_button_url: Array
_article_modules_1_download_box_download_box_button_url: Array
_yoast_wpseo_primary_category: Array
_wp_old_slug: Array
modules_0_module_title: Array
_modules_0_module_title: Array
modules_0_background_color: Array
_modules_0_background_color: Array
modules_0_module_type: Array
_modules_0_module_type: Array
modules_0_filter_posts_by_taxonomy: Array
_modules_0_filter_posts_by_taxonomy: Array
modules_0_filter_posts_by_tags: Array
_modules_0_filter_posts_by_tags: Array
modules_0_link_text: Array
_modules_0_link_text: Array
modules_0_link_url: Array
_modules_0_link_url: Array
article_modules_2_title: Array
_article_modules_2_title: Array
article_modules_2_content: Array
_article_modules_2_content: Array
_yoast_wpseo_focuskw_text_input: Array
_yoast_wpseo_focuskw: Array
_yoast_wpseo_linkdex: Array
page_summary: Array
_page_summary: Array
modules_1_text: Array
_modules_1_text: Array
modules_2_module_title: Array
_modules_2_module_title: Array
modules_2_background_color: Array
_modules_2_background_color: Array
modules_2_column_ratio: Array
_modules_2_column_ratio: Array
modules_2_editor_content_left: Array
_modules_2_editor_content_left: Array
modules_2_button_text_right: Array
_modules_2_button_text_right: Array
modules_2_button_type_right: Array
_modules_2_button_type_right: Array
modules_2_button_url_local_right: Array
_modules_2_button_url_local_right: Array
_wp_old_date: Array
article_primary_tag: Array
_article_primary_tag: Array
article_modules_0_title: Array
_article_modules_0_title: Array
article_modules_0_content: Array
_article_modules_0_content: Array
article_modules_1_title: Array
_article_modules_1_title: Array
article_modules_1_content: Array
_article_modules_1_content: Array
_dp_original: Array
_edit_lock: Array
_edit_last: Array
Hedging of EUR refinancing
Case studies

Hedging of EUR refinancing

Background
  • Refinancing of an existing unitranche (provided by a Debt Fund), with an optimized Senior (four lending banks) / Second Lien (Debt Fund) structure
  • Existing unsuited hedging instruments with negative marked to market from the previous financing
  • 0.00% and 0.25% floors on EURIBOR to be taken into consideration
  • Business plan included potential refinancing after two years and the desire to hedge for a longer period (4yr-5yr) than the mandatory hedging requirement
Our Approach
  • Provide support for legal documentation negotiation (hedging letter and security wording for Second Lien hedging)
  • Analyse different options available on the existing hedging instruments: Termination, Blend and Extend, Run-off or Top Up
  • Work closely with the company and the sponsors to structure and implement an optimal hedging strategy while mitigating the potential impact of break costs in a refinancing scenario after two years
  • Implement a hedging strategy that provides certainty for the first two-years and flexibility thereafter
  • A two-year swap followed by a two-year out of the money option (swaption) to enter into a two-year swap were implemented
Benefits

Pre-Closing
Large savings on the termination costs of the existing hedging instruments

Post Closing
Tailor made four year interest rate hedge strategy to support the business case:

  • Two-year swap with floor buy-back to provide certainty on interest costs
  • Two-year out of the money (swaption) on a two-year swap to:
  1. mitigate break costs in a refinancing scenario
  2. provide a worst case hedge if EUR rates are above the strike of the swaption in two years
  3. benefit from a low rate environment in two years time
  • Deferred premium on the swaption to minimize liquidity impact
  • A competitive process including five banks was conducted to ensure an optimal pricing outcome for the client
 

More case studies

Case studies
FX ongoing support
Private Equity July 2019
Case studies
IR Hedging termination
Private Equity July 2019
Case studies
Private Equity Fund Asset Sale Hedging – Dual-track process
Private Equity April 2019

Contact us

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