Textron Finance, a company with operations in various sectors, including the aircraft and automotive industry, recently entered into a 14-month interest-rate swap to convert USD220 million of fixed-rate debt into a synthetic floating-rate liability. Brian Lynn, v.p. and treasurer in Providence, R.I, said Textron sought to receive a fixed interest rate and pay a floating rating because it believes over the next 12 months LIBOR is more likely to remain flat or drop lower than to rise. He added, "we see more opportunity than risk considering the relatively short-term nature of the swap." It entered the swap now because it believes this is the low end of this year's rate cycle. The swap mirrored the 14-month maturity of the medium-term notes. In the swap Textron receives approximately 4%. He declined to detail the rate it pays.
The counterparties to the trade were Barclays Capital, Fleet and Bank of Tokyo. Spokesmen at the banks did not return calls. Textron requires a credit rating of at least a single A for its counterparties, Lynn added.
