Erste Europäische Pfandbrief- und Kommunalkreditbank, a Luxembourg-based agency that lends to state authorities within the European Union, has entered a cross-currency basis swap to convert CHF200 million (USD147.67 million) of a recent CHF300 bond offering into a euro-denominated liability. Markus Thesen, head of treasury, said the EEPK converted a portion of the offering into euro-denominated exposure in order to provide a liability match for its asset portfolio, which is 60% denominated in euros, 30% in U.S. dollars and 10% in Swiss francs. In the swap, the agency is paying Euribor plus a spread and receiving Swiss franc LIBOR plus a spread. Thesen declined to be more specific. The swap matches the three-year maturity on the bond.
Thesen declined to reveal the counterparty on the transaction. He said, however, the agency chooses swap counterparties based solely on price, adding that it requires a minimum credit rating of single A plus. The agency has EUR1.5 billion to raise in the capital markets this year. Thesen explained that EEPK issues both floating-rate and fixed-rate debt depending on investor demand. Any fixed-rate issuance is converted into a floating-rate liability via swaps.
