Rentenbank, a Germany agency which finances agricultural projects, has entered an interest rate swap to convert a recent EUR100 million (USD104.76 million) offering into a synthetic floating-rate liability. In the swap, Rentenbank is receiving the 4.125% fixed-rate coupon on the bond and paying a Euribor-based rate. A treasury official in Frankfurt said it is the agency's policy to keep borrowing costs Euribor-based to match its lending portfolio. Barclays Capital is the counterparty on the swap and was chosen because it was the underwriter on the bond. Rentenbank requires derivatives counterparties to have a minimum rating of single A.
The agency plans to raise EUR8-10 billion this year. Any bond offerings that are issued in currencies other than euros will be converted into synthetic euro-denominated liabilities using foreign exchange swaps. The official said the agency does not target specific volumes in foreign currency issuance, but last year's levels would represent the best guess for this year. Last year 47% and 44% of issuance was denominated in U.S. dollars and euros, respectively. Australian dollars, Swiss francs and Canadian dollars accounted for 7.5% of issuance and the balance was denominated in Japanese yen, New Zealand dollars, Hong Kong dollars and Norwegian krone.
