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Derivatives

U.K. Property Co. Enters I-Rate Swap

Brixton plc, a U.K. commercial property developer and investor, has entered into an interest-rate swap to convert a recent GBP150 million (USD254 million) 16-year bond into a floating-rate liability. Steven Owen, deputy chief executive in London, said it elected to pay floating in the swap because six-month LIBOR is currently around 4%, which is significantly lower than the fixed coupon of the bond.

In the 16-year swap, the corporate pays around 100 basis points over six-month LIBOR and receives 6% fixed, which mirrors the fixed coupon on the bond, Owen explained. Rates would have to increase to over 5% for the effect of the swap to be negative, he added. Owen declined to name the swap counterparty.

Barclays Capital and The Royal Bank of Scotland were bookrunners on the bond issue.

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