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Derivatives

SNCF Enters Cross-Currency I-Rate Swap

French rail operator SNCF has entered a cross-currency interest-rate swap to convert a USD200 million fixed rate bond into a euro-denominated synthetic floater. Mizuho International, formerly known as IBJ International, was the bookrunner and swap counterparty. Frank Toulouze, director in primary and structured finance at Mizuho International in London, said in the swap SNCF pays six-month Euribor and receives the 4.81% coupon on the bond. Six-month Euribor was 3.55% on Tuesday. The swap matches the five-year maturity of the bond.

Christine Hemat, treasurer at SNCF in Paris, said it entered the foreign exchange component of the swap because it converts all dollar receivables into euros as it does not have any need for dollars. It entered the interest-rate component because it keeps 75-80% of its EUR6.5 billion (USD5.9 billion) of net debt in fixed rate and existing swaps had matured. SNCF is more concerned with the long term than the likelihood of interest-rate cuts in the coming months so short-term predictions did not play a significant role in the decision to enter the swap, according to Hemat.