HVB Real Estate Bank, the commercial mortgage lending arm of HypoVereinsbank, with assets of EUR79 billion (USD77.59 billion), has entered two cross-currency interest rate swaps in the past two weeks. The first was to convert a fixed-rate NOK500 million (USD66.69 million) bond offering into a synthetic floating-rate euro-denominated bond. The firm is paying Euribor plus a spread and receiving a fixed rate in the swap, said Christian Barrakling, a trader in the asset and liability management group in Munich. He declined to disclose the exact levels HVB Real Estate is receiving and paying. Den Danske Bank Group is the counterparty on the swap and the underwriter of the bond.
The second transaction was an fx and basis swap on a LIBOR-based floating-rate USD160 million bond. The offering was split in two: a USD110 million five-year bond and a USD50 million three-year bond. Barrakling also declined to disclose the specific funding levels on the swap, but added that its parent HypoVereinsbank is the counterparty on the swap and Lehman Brothers underwrote the transaction. Although HVB Real Estate Bank would consider using Lehman as a counterparty on transactions, it entered the swap with its parent institution because HypoVereinsbank's terms allowed HVB Real Estate Bank to reach its funding target, Barrakling said.
The main driver behind funding in foreign currencies is demand from investors through reverse inquiries brought to them by relationship firms, Barrakling said. Although HVB Real Estate Bank has no formal minimum rating, it prefers to enter swaps with counterparties that are at least AA, he said.
