Extendicare Health Services (EHSI), a U.S. healthcare subsidiary of Extendicare, recently entered two interest-rate swap and cap agreements to convert fixed-rate debt offerings into synthetic floaters. Mark Durishan, cfo and treasurer of Extendicare in Milwaukee, Wis., said that by changing the notes to floating-rate the corporate reduced its funding costs. The swaps mirror the sum and maturities of EHSI's note sales, comprising a recently issued USD125 million offering, maturing 2014 and a USD150 million note sale due to expire in 2010, that was issued in 2002, he said.
According to the firm's 8-K filing, EHSI entered interest-rate caps set at 7% for both swaps. For the notes due to expire in 2010 the corporate paid a fee of USD3.5 million upfront to the counterparty, which will be amortized over the term of the cap. EHSI will receive a variable rate of interest equal to the excess, if any, over 7% of six-month LIBOR. For the debt due to mature in 2014, the firm receives the same variable rate as in the swap and pays a fixed-rate equal to 75 basis points. Meanwhile the corporate's existing interest-rate swap and cap agreements have been unwound for an aggregate gain of USD3.3 million.
Lehman Brothers and U.S. Bank were the swap counterparties. Durishan said they were selected because they form part of the corporate's syndicate relations group.
