Montreal-based Microcell Telecommunications, a wireless player with a network covering 95% of the Canadian population, is considering entering a cross-currency interest-rate swap. Microcell hired Mario Brin, a private financial consultant and derivatives specialist, three months ago to work closely with company officials to determine the best way to hedge its risk on a high-yield bond offering that matures in 2007. The company is looking to pull the trigger on the swap by early next year, said Brin. Officials at the company confirmed Brin's role.
The company raised USD418 million from the bond issue when it came to market in 1996, Brin said. However, in January the bonds will start paying a fixed coupon of 14% for the remaining five years. In the interest-rate swap, Microcell would look to pay a floating rate and receive a fixed rate on the bond. Brin said Microcell would choose a counterparty from a group of relationship banks, which he declined to name.
Microcell would also convert the currency if it decided to enter the swap, because 95% of the company's revenues are in Canadian dollars and the bond is in U.S. dollars. "We're brainstorming the idea right now. We want to see if entering the derivatives market can help us hedge our exposure on the bond offering," Brin said. He added that the swap is likely to match the five-year maturity of the bond, but declined to specify the currency rate the company is looking to get on the deal. "That's what I'm researching right now," he added.
