Nationwide Building Society, a U.K. thrift, is considering hedging currency risk on a USD1.2 billion benchmark bond. Nationwide does not convert all its foreign currency debt into sterling. It keeps euro and dollar debt and hedges the risk according to its funding needs and the state of the market, explained Sarah Hill, senior dealer on the capital markets desk in Northampton.
Hill has decided not to convert the proceeds of the bond now, but will keep monitoring the markets. "We will probably reassess [entering a currency swap] in a month's time," she added. When selecting a counterparty, the thrift looks for competitive pricing, said Hill, adding it would likely execute the swap with three counterparties.
HSBC and UBS were the bookrunners on the bond. The bond matures in 2009 and pays a floating-rate coupon of three-month LIBOR plus 12.5 basis points. This is the largest dollar-denominated bond the thrift has issued.
