Next, a U.K. clothing retailer, has entered its first interest rate swap to convert a portion of a recent bond offering into a synthetic floating-rate liability. Andrew Jones, treasurer in Leicester, U.K., said the company executed the swap in order to match its asset profile. He noted that the U.K. retailer does not have a specific floating-to-fixed ratio of debt that it targets, but is conscious of the balance. Jones declined to disclose the percentage of the GBP300 million (USD491.91 million) offering which was converted into floating-rate debt.
This is Next's first bond issue, according to Jones, who added that the retailer issued a bond 17 years ago under its previous name, J Hepworth & son. The new debt is being used to pay down bank loans used for financing share buy backs and to provide working capital.
In the swap, Next pays a LIBOR-based floating rate and receives the 5.25% fixed coupon on the bond. On the portion that was converted, the swap matches the 10-year maturity of the bond. Jones declined to identify the counterparty on the swap. Barclays and Royal Bank of Scotland were the lead underwriters on the bond issue.