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Derivatives

Caltex Eyes I-Rate Hedge

Caltex Australia, Australia's largest oil refining and fuel distribution company, with over AUD3.2 billion (USD1.6 billion) in assets, is planning to enter interest-rate swaps on the back of its AUD1 billion floating-rate liability portfolio which consists of bonds and bank debt. Currently, 40% of the portfolio is hedged via synthetic fixed positions and the firm is looking to increase the amount to 50% of the portfolio as it anticipates an interest-rate hike over the course of the year, according to Seong Lim, treasury manager in Sydney. "We think rates have bottomed out," said Lim.

He continued that as the firm expects interest rates to rise in the next six months, probably by 25 basis points, Caltex will look to pay a fixed rate and receive the floating three-month bank bill swap reference rate, at 4.225% Tuesday. Lim declined to elaborate. The average maturity for the interest-rate contracts will be three years.

Potential counterparties consist of the firm's bankers: Commonwealth Bank of Australia, Deutsche Bank, National Australia Bank and Westpac Banking Corp. Tara Thomas, spokeswoman at Deutsche Bank, declined comment, citing client confidentiality. Majella Allan, spokeswoman at NAB in Melbourne, declined comment. Spokespersons at Westpac and CBA did not return calls.

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