DaimlerChrysler is considering entering an interest-rate swap on the back of a USD2.83 billion bond offering it issued two weeks ago. In the swap DaimlerChrysler would receive the 7.3% coupon and pay a LIBOR-based rate on the USD1.5 billion dollar tranche. The swap would mirror the 10-year maturity of the bond, according to an official at the firm.
"This is a strategy we've used successfully in the past. It's become a natural part of our capital raising efforts," he added. However, the company is still weighing its options and keeping an eye on 30-year Treasury rates before enacting a specific interest-rate swap plan. It plans to wait a month before it pulls the trigger on a swap to see if economists are predicting a sharp increase in the Treasury rate. Unless there is a large change it will enter the swap. The official declined to elaborate.
The remainder of the offering was denominated in euros. At this point there are no plans to engage in a foreign exchange swap or interest-rate swap on that portion of the bond. The euro tranche carries a 5.625% coupon with a seven-year maturity. The company is not planning a foreign exchange swap because it has offices in Europe and intends to use a portion of the offering's proceeds there.
The official declined to comment on possible counterparties for the deal, but said that DaimlerChrysler has a host of relationship banks, which it will use, including Bank of America, Goldman Sachs and Deutsche Bank, which led the bond offering. Officials at the firms declined to comment.
