The European Investment Bank has entered an interest rate swap to convert a recent USD3 billion fixed-rate bond offering into a synthetic floating-rate liability. Carlos Guille, head of funding for American, Asia and Pacific capital markets in Luxembourg, said the agency typically converts fixed-rate debt to floating, but keeps some fixed-rate liabilities, depending on lending requirements.
EIB did not convert the offering into a euro-denominated liability because it has U.S. dollar lending needs, Guille added. In the swap, EIB is receiving the 2 3/8% coupon on the three-year bond and paying LIBOR minus a spread. The swap matches the maturity on the issue.
Guille would not disclose the counterparty on the transaction, but he said the lead managers were Deutsche Bank, Morgan Stanley and Schroder Salomon Smith Barney. Often EIB enters into swaps with the lead managers on offerings, he noted, but it depends on the specific offering. The bank only enters swaps with counterparties that have minimum credit ratings of AA and also requires a collateral agreement to be in place, Guille added. Officials at Deutsche Bank and Morgan Stanley declined comment. Calls to SSSB were not returned.