U.S. Utility To Flick Switch On Swap Debut

  • 10 Mar 2003
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National Fuel Gas, a Buffalo, N.Y.-based diversified energy company with approximately USD1.4 billion in annual revenue, is expecting to enter into its first interest rate swap in the coming months. Ronald Tanski, senior v.p. and controller, explained the utility envisages entering into a fixed-to-floating swap in response to an anticipated decline in the portion of floating rate debt in its capital structure.

National Fuel's floating rate debt is expected to fall to around USD50 million by

May, from present levels of approximately USD240 million, for a variety of cash flow reasons, Tanski explained. It will likely enter an interest rate swap with a notional value of about USD200 million to counteract this decline and maintain the firm's fixed-to-floating mix, he said. The utility company has previously used Treasury locks, which lock in the yield or price of Treasuries before a bond issue.

The interest rate swap would be executed on the back of bonds issued by National Fuel, most likely on older issues which mature in five to six years, said Tanski, explaining that the corporate would initially prefer to take on the floating rate interest rate risk for short periods. National Fuel has approximately USD1.3 billion in outstanding debt.

Should the firm go ahead with its maiden interest rate swap, National Fuel will likely use its relationship banks. Tanski declined to name the banks.

Moody's Investors Service rates National Fuel A3, Standard & Poor's rates it BBB plus and Fitch Ratings gives it a single A minus rating.

 

  • 10 Mar 2003

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4 Barclays 166,062.82 634 6.03%
5 Goldman Sachs 162,877.27 537 5.92%

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5 Credit Agricole CIB 18,048.72 104 5.11%

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5 Morgan Stanley 10,194.88 57 6.62%