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Derivatives

BMW To Take Advantage Of Sterling Swap Market

BMW U.S. Capital plans to enter a currency swap to convert a recently issued GBP100 million (USD183 million) bond into U.S. dollars.

BMW U.S. Capital plans to enter a currency swap to convert a recently issued GBP100 million (USD183 million) bond into U.S. dollars. The entire note will be converted and the proceeds will be used for customer-sales financing in the U.S., according to Elmer Steurer, co-head of capital markets at BMW's treasury in Munich.

Steurer said, "The shape of the British swap market was the driving factor behind the decision to issue in sterling." The swap rate is six basis points over U.K. LIBOR. If the bond had been issued in dollars the swap rate would be around 20 basis points over U.S. LIBOR.

Steurer added that BMW's U.S. capital markets division may enter an interest rate swap at a later date, but said this would depend on that group's risk management strategy at the time.

The bond pays a fixed coupon of 4.625% and matures in December 2006. ABN AMRO and JPMorgan were the bookrunners on the bond.

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