U.S. electricity distributor Progress Energy has purchased interest rate derivatives to hedge its interest rate swap portfolio against rising rates. Tom Sullivan, treasurer in Raleigh, N.C., said that as interest rates look set to rise, the corporate has sought to cap its exposure to a rate hike in its portfolio of synthetic floating rate liabilities. Progress regularly enters fixed-to-floating rate swaps as a means of managing its interest rate portfolio, he noted. At the end of September Progress had a total of USD850 million in fixed rate debt that it had converted into synthetic floating debt, according to the firm's 10-Q filing.
Sullivan declined to give specific details about the transactions, but said it hedged around 40% of its swap portfolio. He declined to name counterparties for the transactions.
