Taiwan's China Airlines recently entered a five-year TWD1 billion (USD29 million) interest rate swap on its floating rate liability portfolio and plans to convert more into fixed rate debt in the coming months. "It's a good time to increase our liability portfolio hedging," said Yang Yen, researcher in the financial department in Taipei.
In the swap China Airlines pays a fixed rate and receives floating to partially hedge its TWD26 billion floating-rate domestic portfolio. Yen continued that around 30% of its domestic portfolio, combined with its U.S. dollar-denominated USD1.4 billion in debt, is currently in fixed rate liabilities. She explained that given prevailing low rates, China Airlines plans to increase its fixed rate hedging by 10% or greater in the coming months. "We're just waiting for the right price," Yen added. "Flow-wise, a lot of corporates are interested in five-year swaps," said Diamond Doong, manager of interest rate trading at Taishin International Bank in Taipei, the counterparty on the swap.
