The Council of Europe Development Bank has entered a cross-currency interest rate swap to convert a recent fixed-rate USD500 million bond offering into a synthetic euro-denominated floating-rate liability. Arturo Seco, deputy funding manager in Paris, said the company always converts dollar-denominated debt into euros--its funding currency--and also maintains a floating-rate debt portfolio.
Dollar-denominated debt provides an attractive funding rate for the council because interest rates in the U.S. are at historic lows, according to Seco. A large proportion of the council's recent debt has been issued in dollars because of this opportunity. The development bank also entered a swap to convert a USD750 million offering into a floating-rate euro-denominated liability in January (DW, 1/27).
In the swap, the council pays a three-month Euribor-based rate and receives the 4.25% fixed coupon on the bond. BNP Paribas is the counterparty on the swap as well as one of the lead managers with Daiwa Securities. Seco said BNP was chosen because it brought the deal as a complete package to the development bank. The council does not have a minimum credit rating for counterparties, but requires collateral agreements, Seco added.
