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Derivatives

Property Manager Considers Hedging Fixed-Rate Bond

Green Property, a property developer, is considering whether to enter a swap to convert a recent fixed-rate bond into a synthetic floating-rate liability. Danny Kitchen, finance director in Dublin, said the property developer "may look at a [swap] on the bond in due course to bring down the cost." He declined to be more specific. The company raised GBP150 million (USD214 million) through a 15-year 7.25% bond offering late last month. The proceeds are being kept in sterling as the Irish company has substantial interests in the U.K.

Kitchen said the company would be keen to enter a short-term swap, likely in the order of one or two years, to convert an unspecified portion of the liabilities to floating-rate. Still, the company will not enter a swap at any cost, as it sees the 7.25% coupon as an attractive level. "We are close to a rate trough here and we have to have a view not to be too greedy," he explained. However, Green Property has a policy of hedging a minimum of 50% of its liabilities for interest-rate risk. Kitchen declined to specify at what rate the company would consider a deal. Dresdner Kleinwort Wasserstein and HSBC Group, two of Green Property's core bankers, led the bond deal. Kitchen said it will use one of its 10 core banks, which includes DrKW and HSBC Group, to execute the swap.

Standard & Poor's rates the Dublin and London-listed company BBB minus and Fitch rates it BBB.

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