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Derivatives

French Agency Uses I-Rate Swap For EUR1 Billion Deal

Dexia Municipal Agency, a French public sector financing agency, has entered an interest rate swap on a recent EUR1 billion (USD982 million) bond offering. In the swap, Dexia is receiving the fixed rate on the bond--4.25%--and paying Euribor plus a spread, said Véronique Hugues, funding manager in Paris. Hugues said Dexia entered the swap because it prefers to avoid interest rate risk by maintaining floating-rate exposure on its debt portfolio.

CDC IXIS Capital Markets, Commerzbank Securities and Schroder Salomon Smith Barney are the counterparties on the swap, as well as the joint managers of the bond offering, Hugues said.

Hugues added that in addition to interest rate swaps, Dexia typically uses foreign-exchange swaps when issuing in currencies other than euros to avoid fx exposure because its lending portfolio is mainly held in euros. The agency has EUR2-3 billion of fundraising to complete this year, having raised EUR6 billion so far.

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