SBC Communications, a telecoms giant in San Antonio, is considering entering an interest-rate swap to convert the fixed-interest rate on a USD1 billion global note offering it brought to market in late January, according to a company official. "We feel now is the time to look seriously at doing this. There is that threat that interest rates will rise, but we know with our credit rating we fair well in the floating rate market," the official added. The offering was rated Aa3 by Moody's Investors Service and AA minus by Standard & Poor's.
The swap is likely to be a plain-vanilla deal with a five-year maturity to match the maturity on the offering. The note carries a 5.8% coupon. SBC, which has used interest-rate swaps in the past to hedge the risk on both its loan and bond portfolios, would look to enter an interest-rate swap, in which it pays a floating rate and receives the coupon on the bond.
Credit Suisse First Boston and Merrill Lynch were the joint book runners on the note offering. Both firms have been placed on the telecommunication company's short list for possible counterparties on the swap, the official said. Officials at CSFB and Merrill Lynch declined to comment.
