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Derivatives

BG Energy Capital Enters Swap On MTN, Plans More

BG Energy Capital, guaranteed by BG Energy Holdings, has entered a cross-currency interest rate swap to convert a recent EUR22 million (USD21.49 million) fixed-rate medium-term note into a U.S. dollar-denominated floating-rate offering. The company plans to use similar foreign-exchange and interest rate swaps for future issuance from its euro medium-term note program, said Charles Stewart, head of funding and investment in Reading, U.K. In the swap, BG Energy Capital is paying LIBOR plus a spread and receiving the fixed coupon on the bond, which Steward declined to disclose.

The company has raised in excess of USD400 million through the EMTN program since its initiation in March and plans on issuing up to USD500 million in additional funds throughout the remainder of the calendar year. Stewart said the company posts desired pricing for its EMTN program and then takes reverse inquiries from investors via firms. Typically BG Energy Capital will enter into a swap with the firm which has brought in the investor. In this case, ABN AMRO was the underwriter on the transaction and the counterparty on the swap.

Because the company will issue in any currency which gives it attractive terms, it is likely to use fx swaps on future issuance since it maintains all of its borrowings in U.S. dollars. Stuart added that the company manages its interest rate exposure on all its debt on a portfolio basis via a risk-management group. He would not elaborate further on BG Energy Capital's level of floating-to-fixed rate debt.

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