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Californian Corp. Considers Converting Bond

UnionBanCal, the San Francisco-based holding company for Union Bank of California, is considering entering an interest-rate swap to convert a fixed-interest rate USD200 million bond offering it brought to the market last month into a synthetic floating-rate liability, according to K. Hamahashi, treasurer. He added that the swap would likely be a plain-vanilla deal with a five-year maturity to match the bond offering. "We look at the swap market on a continuing basis. This is something we've been considering as part of the entire bond offering process," Hamahashi said.

UnionBanCal, which is majority owned by Japan's Mitsubishi Tokyo Financial Group, would look to enter an interest-rate swap in which it pays a floating rate and receives a fixed rate, based on the 5.75% coupon, to hedge the interest-rate risk on the notes. Hamahashi said the company has a number of relationship banks it deals with on a regular basis, all of which have been in discussions with the company about the possibility of engaging in an interest-rate swap. He declined to name counterparties or detail what spreads it would look to pay and receive.

Salomon Smith Barney was the lead manager on the bond offering. Morgan Stanley, Bear Stearns and Lehman Brothers co-led the issue. Spokesmen at the firms declined to comment. The notes are rated A2 by Moody's Investors Service and A minus by Standard & Poor's.

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