Rexam, the world's largest producer of beverage cans and the fifth-largest consumer packaging company, entered an interest-rate swap and a cross-currency interest-rate swap on the back of two separate bond offerings earlier this month. The company entered a vanilla interest-rate swap to convert a fixed-rate liability in euros and another to convert a fixed-rate sterling-denominated liability into a floating-rate, U.S. dollar-denominated obligation. Chris Bowmer, treasurer in London, said the U.K.-based company has nearly 90% of its operations abroad but also has a strong investor base at home, which is why the company issued in sterling and then converted to dollars. "We have stronger recognition here, investors are more familiar with the company and are more familiar with the equity story," he noted. The company has a GBP2 billion (USD2.9 billion) market capitalization.
In the first deal, Rexam raised EUR550 million (USD487 million) through a five-year offering. In that swap, Rexam will pay a six-month Euribor-based rate and receive the 6.625% coupon for the five-year duration of the bond. In the GBP250 million sterling deal, Rexam will pay a dollar-denominated, six-month LIBOR-based rate and receive the 7.125% coupon on the seven-year bond, matching the size of the deal. Bowmer declined to name counterparties for the swap, except to say Rexam selected five banks from an auction of its core relationship banks, based on price.
The company uses interest-rate and foreign exchange swaps to hedge its balance sheet, Bowmer said. Standard & Poor's rates Rexam BBB and Moody's Investors Service rates it one notch lower at Baa3.
