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Derivatives

French Rail Operator Converts Sterling Bond

SNCF, the French rail operator, has entered a cross-currency interest-rate swap on the back of the GBP350 million (USD498 million) bond it sold earlier this month, according to Christine Hemat, treasurer in Paris. SNCF converted the entire proceeds of the deal in the swap, which also matches the 25-year tenor of the bond offering. Hemat said the company issued in sterling because it affords longer maturities than the euro market, which is not deep enough and does not extend beyond 15 years.

In the swap, SNCF pays a floating rate above six-month EURIBOR, which Hemat declined to specify, and receives the 5.375% coupon on the bond in sterling. The swap was executed when spot was GBP0.61 last week. She said SNCF always converts foreign currency deals back into floating-rate euro obligations, though it sometimes leaves fixed-rate euro deals alone.

She declined to name its counterparties though Barclays Capital and UBS Warburg were the lead underwriters. Moody's Investors Service rates SNCF Aa1 and Standard & Poor's has it one notch higher at AAA.

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