WellPoint Health Networks, which grossed more than USD13 billion in annual revenues last year, is considering entering an interest-rate swap to convert a recent USD350 million note offering into a floating-rate liability. The Thousand Oaks, Calif.-based health care provider is contemplating entering a swap in which it would receive the 6.3% coupon on the 10-year notes and pay a LIBOR-based rate, according to a company official. The maturity on the swap would match the maturity on the note offering.
WellPoint has held off entering a swap since the bond issue last month because it wanted to see if Treasury yields would fall further, the official noted. "Now that things are looking like they're stabilizing, we are delving deeper into the prospect of engaging in a swap to possibly gain a sub-LIBOR rate," he noted. The company isn't concerned about the potential for rates to progressively rise in the coming months. "Paying a floating rate is always better than being saddled with a fixed rate. It's just better for the overall balance sheet," he observed. Deutsche Bank and JPMorgan are on WellPoint's short list as possible swap counterparties. The firms jointly managed the note offering.
A banker at Deutsche Bank said interest-rate swaps are always part of the firm's procedure when leading a debt offering. He declined comment on whether the firm is looking to package a swap for WellPoint. JPMorgan officials declined comment.
The company has entered interest-rate swaps in the past as part of its debt management program. The notes are rated A minus by Standard & Poor's and Baa1 by Moody's Investors Service.
