Great Universal Stores has entered a cross-currency interest rate swap on a EUR600 million (USD645 million) tranche of a recent bond offering to convert it to a floating-rate sterling denominated liability. The London-based retail conglomerate also entered an interest rate swap on the GBP300 million (USD483 million) tranche of the issue to convert it to a floating-rate liability. Albert Hollema, group treasurer in Amersfoort, the Netherlands, said the company needed to convert both tranches into floating liabilities to maintain its optimal fixed-to-floating ratio of 50/50. The cross-currency swap was used to keep its liabilities in sterling, which it uses for operations.
In the swap on the 10-year EUR600 million tranche, Great Universal receives the 4.162% coupon on the bond in euros and pays LIBOR plus a spread in sterling. The exchange rate is GBP0.6615--the spot level when the bond was priced. In the transaction entered for the 4.5-year GBP300 million tranche, the company is receiving the 5.671% coupon and paying LIBOR plus a spread. The maturity of both swaps match the tenor on the bonds.
Hollema declined to disclose the counterparties on the swap, but said it used three firms on the euro-denominated tranche and four firms for the sterling-denominated swap. He added that the company requires a minimum credit rating of single A. In addition, counterparties must also be willing to lend to Great Universal, he added.
