Dexia Municipal Agency, a public sector financing agency, entered a cross-currency interest-rate swap on its recent USD1 billion offering. Véronique Hugues, funding manger in Paris, said the company is receiving a fixed rate equal to the 4.875% coupon on the bonds and will be paying a floating interest rate, though she would not detail the rate. In addition, proceeds from the dollar offering were exchanged into EUR1.099 billion.
The agency has EUR8-10 billion in remaining financing needs this year and will use similar swaps in the future, Hugues said. Dexia MA keeps all its debt in euros so converts all its foreign currency denominated debt.
Merrill Lynch International is the counterparty on the swap. Hugues said the bank is one of the three underwriters on the deal--the other two are Nomura and BNP Paribas--and came to Dexia with the swap idea. She said Dexia liked the swap, as it allowed the firm to achieve a favorable funding target, and Dexia MA also has a relationship with Merrill Lynch, having used it before as a counterparty.
Dexia Crédit Locale, the parent of Dexia Municipal Agency, has another EUR4 billion of funding needs this year, Hugues noted. That agency is likely to enter into interest-rate swaps for those bond offerings, since it typically does not keep fixed-rate interest exposure. It may also issue in foreign currencies and may exchange proceeds back to euros, depending on its asset and liability management, Hugues said.
