Pitney Bowes, an office equipment maker with roughly USD4 billion in annual revenue, is considering unwinding interest rate swaps to raise the proportion of fixed-rate debt in its portfolio. Dessa Bokides, v.p. and treasurer in Stamford, Conn., said the company plans to become more active in interest rate risk management given the likelihood that interest rates will not get much lower than they are now, and the company may unwind interest rate swaps to that end. "Pitney Bowes has always been risk averse, but the actual policy of actively managing the portfolio and changing the mix of fixed in floating is something new," she said, adding it is being done to protect the company against what she expects will likely be a trend toward higher interest rates.
Currently, Pitney Bowes' USD3.5 billion debt load is split evenly among fixed and floating. Bokides said she plans to tilt the balance in favor of fixed. "This is a good time to anchor our portfolio," she said, adding she can foresee concentrating as much as 70% of the portfolio in fixed-rate obligations over the course of the next year. To get there, the company may unwind previously entered, plain vanilla swaps that had converted fixed-rate debt into synthetic floaters. She declined to name specific deals or swaps that are under consideration. Bokides, who worked in risk management at Goldman Sachs before joining Pitney Bowes, stressed it will not be an interest rate swaps trader, but that it will instead unwind large swaps to affect its fixed-to-floating mix.
The company recently raised USD400 million in 10-year money at 4.625%. Given its intent to raise the fixed-rate ratio, Pitney Bowes will leave this deal as a fixed-rate liability.
