British glassmaker Pilkington has entered several euro-denominated interest-rate swaps to convert a EUR350 million (USD320 million) fixed-rate bond it issued at the beginning of the month into a synthetic floater. Adrian Marsh, head of group accounting and treasury in St. Helens, England, said the company entered the swap to have floating liabilities as global interest rates continue to fall. The corporate issued fixed-rate debt because there is more investor demand for fixed rate than floating-rate debt. "Fund managers, insurance companies and retail all want fixed-rate and the seven-year aspect of it is the liquidity," he said, adding it would be unusual for a corporate to issue a floater. Proceeds from the bond offering will be used to cover the company's euro funding needs and will not be swapped back into sterling.
In the swap Pilkington pays fixed at 6.5% and receives Euribor. Marsh declined to be more specific except to say the premium is in single digits, on average. Deutsche Bank and Salomon Smith Barney led the bond offering and also are counterparties on some of the swaps. However, Marsh said Pilkington also used other banks, which he declined to name. The company has about GBP900 million (USD1.3 billion) in outstanding debt, of which the equivalent of USD568 million is in euros.
