Dutch information services company, Wolters Kluwer, is considering selling the embedded call option in a EUR225 million (USD200 million) perpetual bond it issued last week and enter an interest-rate swap to convert the fixed-rate bond into a synthetic floater.George Dessing, group treasurer in Amsterdam, said it might sell the call to shave 20-30 basis points off its all-in cost of funding.
The call option gives Wolters Kluwer the right to call the bond in seven years and each year thereafter. "In essence [the purchaser of the call option] is speculating on interest-rates from 2008", said Dessing. A bank might be interested in buying the call, he reasons, since if rates fall after 2008 the issuer likely will want to repurchase the right to call the bond.
The company manages interest-rate risk on a portfolio basis and will review its future financing obligations and the amortization schedule of its swap portfolio over the next weeks before it decides whether to enter an interest-rate swap. The debt portfolio is currently at the target level of two-thirds in fixed interest and the remainder floating.
Relationship and credit rating are the most important factors in choosing a counterparty, according to Dessing. The minimum credit rating is A2/A.
