SEB Hypothekenbank, a German mortgage bank, entered an interest rate swap to convert a recent EUR125 million (USD134.12 million) offering into a floating-rate liability. Drew Patrick, treasurer in Frankfurt, said the bank typically issues fixed-rate debt to match fixed-rate loans and does not convert the debt into floating. Its recent EUR125 million bond issue, however, was opportunistic funding without a matched asset and the firm wants to remain market neutral by funding at a LIBOR-based rate.
In the swap, SEB pays LIBOR and receives the 5% coupon on the bond. The counterparties on the swap are DZ Bank, Deutsche Bank, SEB and HypoVereinsbank. Patrick said the firms were chosen because they were the bookrunners on the bond deal.
The mortgage bank plans to raise some EUR2 billion via the bond markets this year. Patrick said interest rate market conditions would determine whether or not SEB enters interest rate swaps to convert a portion of that debt to floating-rate. The bank funds primarily in euros and does not need to enter foreign exchange swaps, Patrick noted.
