Agence Française de Développement, France's principal project aid agency for lending to developing countries, has entered an interest rate swap to convert a recent EUR500 million (USD493 million) bond into a floating-rate liability. In the swap, the agency receives the 4.75% coupon on the bond and pays a spread over six-month Euribor. Gregory Clement, funding manager in Paris, said the agency typically uses interest rate swaps to convert its fixed-rate debt into floating-rate to match its lending portfolio. The agency also uses interest rate swaps to alter the duration of its debt.
Société Générale and Citibank are the counterparties on the swap. Clement said the agency chose the institutions because they offered the best pricing. The minimum rating it requires for a counterparty is single A, although the agency prefers to enter deals with AA rated firms.
Agence Française de Développement does not have any plans to issue further debt before the end of the year, he said, adding that if the agency issues bonds in currencies other than euros it typically uses fx swaps to convert the proceeds into euros.
