Bank Nederlandse Gemeenten, the principal Dutch public sector agency, has entered cross-currency interest rate swaps on two recent offerings to convert them to synthetic floating-rate bonds. The company recently issued a USD100 million bond and a GBP100 million (USD153.48 million) bond and converted the proceeds into euros.
Bianca Ydema, senior manager in capital markets in Den Haag, the Netherlands, said BNG converts all opportunistic foreign currency-denominated offerings into euros because that is the currency it uses to fund its lending portfolio. The agency also converts its fixed-rate debt into floating-rate to obtain more favorable funding costs, she added. BNG has EUR3 billion (USD2.94 million) in funding needs for the remainder of the calendar year and has completed EUR7 billion in financing so far this year.
In the swaps the agency receives the coupon on the bonds--4.1% on the U.S. dollar-denominated offering and 4.635% on the sterling one. BNG is paying six-month Euribor minus a low-teens spread on the dollar offering and six-month Euribor minus a single-digit spread on the sterling bond. Ydema attributed the difference in funding costs to the fact that the dollar bond is a five-year callable bond while the sterling deal has a four-year maturity and is non-callable. Ydema said the agency does not disclose counterparties on transactions, but that BNG selects from a group of firms with minimum ratings of AA.
