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Derivatives

Dallas Industrial Co. May Enter I-Rate Swap

Trinity Industries, a diversified industrial company with revenues of USD1.8 billion, may look to enter a swap to convert the proceeds from a recent floating-rate bank loan facility into a fixed-rate obligation, said Jim Ivy, cfo in Dallas. The company raised USD425 million in a syndicated loan a few weeks ago to renew a loan that was set to expire. The new loan is comprised of USD275 million in three-year debt and USD150 million in five-year debt.

Ivy said Trinity has entered a swap to covert more than half of the total amount raised to a one-year fixed-rate liability and is now looking to enter another swap or swaps to convert part, or all, of the remaining portion to fixed. In any swap, Trinity would look to receive a LIBOR-based rate and pay fixed, he said, declining to be more specific.

The initiative represents somewhat of a change for Trinity. Ivy said the company's policy is generally to hedge only a portion of its interest-rate risk so that it can pay a fixed-rate on bank loans. It may change course now and enter a swap to convert the entirety instead of just a portion because of the current low interest-rate environment. "Generally our policy is that if we're going to hedge, we hedge only a portion of it. But we may swap some more now just for the predictability of having it fixed and with rates so low right now," Ivy said.

Trinity will select derivatives counterparties from among its relationship banks, said Ivy.

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