Taylor Woodrow, a FTSE 250 housing and construction developer, is considering entering its first interest-rate swap to convert part of a GBP250 million (USD356 million) 6.78% 10-year bond into a synthetic floater. Adrian Auer, group finance director in London, said the company is reviewing some interest-rate structures to determine whether it makes sense to hedge the rate risk on the offering. The deal was priced last month. "We will probably use interest-rate derivatives to get the balance right," he said. The company may enter a swap now because this bond offering was its first in more than a decade.
The company would likely receive the fixed-rate coupon and pay a floating sterling rate, but for only part of the total amount and part of the bond's 10-year maturity. "We are looking at whether a portion of that might be better in floating rate for a period," Auer said, adding Taylor Woodrow is also "looking at a range of swaptions." He declined to be more specific.
The bond deal was underwritten by UBS Warburg and HSBC, but Auer said it deals with all the major firms and would chose to enter a derivatives contract based solely on price.
Any interest-rate swap or swaption would be entered to ensure that fixed-rate liabilities account for less than 30% of the company's overall debt burden, he said. Auer declined to reveal the company's current debt load prior to the release of its full-year financials in March. Taylor Woodrow's half-year results from last summer indicate a GBP450 million debt portfolio, prior to its latest issue.
Fitch, the only one of the major agencies to give Taylor Woodrow a rating, has it at BBB plus.
