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EIB Converts Fixed-Rate Bond To Synthetic Floater

13 Oct 2002

The European Investment Bank has entered two interest rate swaps to convert a recent fixed-rate bond offering into a floating-rate liability. The firm entered a fixed-to-floating swap on the back of a recent GBP200 million (USD312.9 million) bond sale and a GBP100 million increase to an existing bond, said an EIB official. The swaps were put on as part of the bank's policy to hedge interest rate risk on its bond sales.

In the six-year swap, EIB receives the 4.5% coupon on the bond, while for the 30-year transaction increase it receives the 5.625% coupon. The bank pays a LIBOR-based rate on both swaps, with the official noting that EIB's AAA credit rating enables it to pay a sub-LIBOR rate, which he declined to specify. The official declined to name the counterparty for the swap. RBC Capital Markets underwrote the bond and Dresdner Kleinwort Wasserstein executed the transaction increase.

The volume of bank clients who take out sterling-denominated loans enables the firm to issue the bond without converting the currency back to euros.

13 Oct 2002