ArvinMeritor, an auto parts manufacturer in Troy, Mich., is considering entering an interest-swap on the back of its USD400 million bond offering last month. "We feel now is an ideal time to examine the possibility of doing an interest rate swap. Nothing has been set in stone. But it's definitely something we're considering," said a company official. The company held off on going ahead with a swap immediately following the offering because there was still a high level of uncertainty over the course the Federal Reserve might take after lowering interest rates consistently throughout 2001. "We wanted to be certain the Fed would not look to raise rates over the next eight months, at least. The latest comments seem to support that," the official said.
The manufacturer would look to convert the 8.75% fixed coupon to a floating-rate liability. The swap would be a plain-vanilla deal with a 10-year maturity, matching the maturity on the bond offering, the official said. In the swap, ArvinMeritor would look to receive the fixed-rate coupon and pay a LIBOR-based floating rate.
JPMorgan and Salomon Smith Barney were the joint bookrunners on the bond offering. Both firms are on the company's list of possible counterparties for a swap, the official said. Officials at the firms declined comment. Moody's Investors Service rates ArvinMeritor Baa3 and Standard & Poor's rates it BBB minus.
