Tesco Plc has entered a cross-currency interest rate swap to convert a recent EUR750 million (USD742.88 million) offering into a synthetic floating-rate sterling liability. The supermarket chain issued euro-denominated bonds to tap into demand from European investors, which included strong interest in France, Germany and some Scandinavian countries, said Keith Richardson, treasurer in Cheshunt, U.K.
The grocer entered an interest rate swap to keep its fixed-to-floating debt ratio close to its target mix of 40% of fixed-rate liabilities and 60% of floating-rate liabilities. Richardson said the company is receiving 4.75%, the fixed coupon on the bond, and paying LIBOR plus a spread. At the same time, Tesco raised GBP600 million from fixed-rate bonds.
Richardson would not disclose the counterparties on the swap, but said it entered the transaction with several firms. He noted the minimum credit rating Tesco requires for counterparties is single A plus, adding the company's choice of counterparties is also relationship-driven.
