United Utilities has entered an interest rate swap to convert a GBP150 million (USD234.34 million) bond offering into a synthetic floating-rate security. Tom Fallon, treasurer at United Utilities in Warrington, U.K., said 95% of its income is generated from regulated monopolies--and is therefore indexed to inflation--so floating-rate liabilities are better matched to its revenue streams. The company is receiving the coupon on the bond in the swap, which is 5.25%, but Fallon would not disclose what United Utilities is paying in the transaction. He would also not disclose the counterparty on the swap. JPMorgan was the bond underwriter.
The company has GBP3 billion in spending requirements that it needs to raise before 2005 for its environmental improvement program. For the majority of that issuance, the company will enter interest rate swaps to convert fixed-rate debt to floating-rate, he said, declining to elaborate.