Enodis, a food service equipment provider, has entered over-the-counter foreign exchange swaps to convert proceeds from a sterling-denominated bond offering it issued late last month into dollars and euros. Although the company is headquartered in London it has significant assets and exposure outside the U.K., said Susan Sharrock Yates, interim treasurer in London. "The bulk of our assets are in dollars and we generally seek to try and match the currency of our assets, but we were advised that it would be [cheaper] to issue in sterling, including swapping across," she said. She declined to quantify the cost saving of issuing in sterling and not dollars or euros.
Enodis entered the fx swaps with Royal Bank of Scotland Financial Markets, which also underwrote the high-yield bond offering with Credit Suisse First Boston. CSFB was not used as a derivatives counterparty. In the swaps, sub-investment grade Enodis converted a portion of the GBP100 million (USD143 million) deal into dollars, a portion into euros and left a portion in sterling. All were done at spot rates at the time of the offering late last month. Sharrock Yates declined to break down the proportions. The swaps match the 10-year duration of the bond. The fixed 10.375% coupon will be left unchanged as the company is happy to have locked in that rate for 10-years. The high-yield offering is part of a broader refinancing that also involves a USD455 million syndicated bank loan.
Sharrock Yates said Enodis selects counterparties from among its relationship banks and that RBOS was chosen for the swaps partly because it extends credit lines to Enodis. "They are a relationship bank and we want to give something back to the banks that lend money to us," she said. Sharrock Yates added Enodis is a risk averse company and does not use derivatives other than plain-vanilla fx and interest-rate swaps.
Standard & Poor's rates Enodis BB minus.
