Volkswagen has issued a PLZ100 million (USD24 million) bond and converted the proceeds into euros via an fx swap as a cheaper way of raising capital. In the swap, the company pays zlotys and receives euros, but Clement Denks, treasurer, declined to detail the exchange rates. He said VW entered the swap because it was offered an arbitrage opportunity via a reverse enquiry from Morgan Stanley. Morgan Stanley is also the counterparty to the swap and is one of VW's relationship banks.
The company will enter similar foreign exchange swaps if there is demand from investors for other emerging market currency bonds, Denks said, adding that VW has future funding needs and will need to issue bonds in the near-term.
