Estée Lauder is considering pulling the trigger on an interest-rate swap to convert its debut bond issue into a synthetic floating-rate liability. Earlier this month, the manufacturer and marketer of makeup, fragrance and skin care products, sold USD250 million in 10-year senior notes. Chris Brugo, director of capital markets in New York, said Estée Lauder is contemplating a swap in which it would receive the 6% coupon on the notes and pay a LIBOR-based rate. The company opted not to engage in the swap as part of an all-in-one offering because it wants to monitor interest rates, but he declined to elaborate.
"The most compelling reason for us to do this would be if we can get LIBOR or a sub-LIBOR financing," Brugo said. The maturity on the swap would equal that of the notes. This would be Estée Lauder's first interest-rate swap on the back of a bond offering. The company has engaged in interest-rate swaps in the past for its syndicated loan portfolio, Brugo said.
Counterparties for the deal will come from Estée Lauder's relationship banks, Brugo said. Among them is Salomon Smith Barney, which served as the sole lead manager for the company's note offering. The notes are rated A1 by Moody's Investors Service and A plus by Standard & Poor's.
