Telenet, a Belgian telecommunications company, has entered a currency swap to convert a U.S. dollar discount bond into euros. Renaat Berckmoes, assistant to the finance director in Mechelen, said the company issued the bond in dollars because there was no market for this type of bond in Europe. "The driving factor behind the swap was the need to cover risk, in view of the very unfavorable dollar conditions and the strong position of the euro," added Berckmoes. "We also wanted to ensure that the swap was U.S. GAAP compliant," he added.
Berckmoes added "We have no plans to swap the offer from fixed rate to floating rate, because our senior debt is nearly all swapped to floating."
The bond has a 10-year maturity, but there is no coupon for the first five years. In the second five years it pays 11.5%. Standard & Poor's rates the corporate B minus.
Berckmoes declined to disclose the rates paid in the swap, but revealed that the counterparties are JP Morgan, Goldman Sachs, ABN AMRO, Société Générale and Royal Bank of Scotland.