Italian construction company Astaldi is considering buying its first credit derivative contract to hedge emerging markets exposure. Giorgio Bianchini, head of finance in Rome, said the company is looking into buying default swaps on sovereigns, such as Venezuela and Turkey, where it undertakes construction projects.
The plan comes in advance of the construction company's initial public offering, which is slated for the second quarter via a Milan listing. "So far Venezuela has been working very well, but we are more open to spending some money on covering ourselves," because of the listing. Credit derivatives "are expensive, but it is worth the expense if you go public because people who buy your shares want to know they are protected," Bianchini added. He stressed the firm has no exposure to Argentina.
The company would likely buy protection from its relationship banks, which include Credit Suisse First Boston and Deutsche Bank. "They are calling me 20 times a day," Bianchini quipped. Traders at both firms referred calls to their spokespersons, who did not return calls.