Burlington Resources in Houston, which has recently issued USD1.5 billion in fixed-rate debt, is being bombarded by calls from bulge-bracket investment firms pitching interest-rate swaps following its purchase of Canadian Hunter Exploration earlier this month. "Numerous banks are pitching us deals. The phone is constantly ringing," said Dan Hawk, v.p. of the treasury.
Hawk added that if Burlington were to enter interest-rate swaps it would be its first foray in the market in more than three years. Previously it was happy with the level of fixed-rate exposure, but the USD1.5 billion bond offering has made it reconsider its position, according to Hawk.
Morgan Stanley, J.P. Morgan, and Merrill Lynch, all of which have already contacted the energy company, are among Burlington's largest relationship banks and would likely be tapped as possible counterparties for any swap deal, Hawk said. The company is likely to execute the swaps with more than one derivatives house. All three firms declined comment.
Hawk added that Burlington is considering pulling the trigger on several interest-rate swaps next year as a way to reduce its interest-rate exposure. "We have a substantial amount of fixed-rate debt. We're going to take a look at a possible swap and see if makes sense," Hawk said. The likely plan would be for Burlington Resources to enter interest-rate swaps in which the company pays a floating rate and receives the fixed rate of the bond offering. Its November offerings were in three tranches. The five-year notes pay 5.6%, the 10-year notes pay 6.4% and the 30-year notes pay 7.25%.
