Schaumburg, Ill.-based Motorola is planning to enter an interest-rate swap to convert the fixed-interest rate on a USD600 million senior note offering it brought to market late last month into a synthetic floating-rate liability, according to a company official. The swap is likely to be a plain-vanilla deal with a 10-year maturity to match the maturity on the offering. The notes carry an 8% coupon. "We're thinking that it's a good opportunity to possibly lock in favorable rates because of the recent interest-rate cuts by the Federal Reserve. It's just a great way to keep our balance sheet in line," the official said. The company would look to enter an interest-rate swap in which it pays a floating rate and receives a fixed rate to hedge the interest-rate risk on the notes.
Goldman Sachs, J.P. Morgan and Morgan Stanley have all been placed on the telecommunication company's short list for possible counterparties on the swap. Officials at the firms did not return calls. All three managed Motorola's October note offering. The senior notes have been rated A3 by Moody's Investors Service and triple B plus by Standard & Poor's. Motorola has used interest-rate swaps in the past on a limited basis for similar hedging plans, the official added.
