Shipping Co. Plans Maiden I-Rate Swaps Voyage
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Derivatives

Shipping Co. Plans Maiden I-Rate Swaps Voyage

CP Ships, one of the world's largest container shipping companies by volume, will probably enter its debut interest-rate swap as part of plans to increase its debt issuance over the next 12 months to finance upgrading its fleet, according to Iain Torrens, treasurer in London. The company, which has revenue of USD2.65 billion, raised USD200 million through a 10-year debt offering last month and may enter a swap to convert the fixed 10.375% coupon on the bond to a floating-rate liability.

"We haven't done any derivatives yet, but we feel that now is the right time in the company's development," Torrens added. The recent bond offering is the first since CP Ships was spun off from parent Canadian Pacific last autumn. He said it also plans to raise more capital in the debt market this year to fund an upgrade to its container shipping fleet, and could use swaps to fine tune its debt profile. "That's sort of the genesis as to why we raised additional money and why we might want to hedge," he said. Torrens declined to detail the amount of capital the company plans to raise or discuss any other aspects relating to the company's use of interest-rate swaps, given that it is still considering whether to use them and is educating itself on the product. And any such action would require board approval, which would not happen until later this summer.

CP began using foreign exchange options earlier this year because most of its costs and revenues are in dollars. Another company official noted it hedges against movements in the euro and Canadian dollar. Torrens declined further comment.

Moody's Investors Service rates the shipping company Baa2 and Standard & Poor's rates it BB plus.

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