Chelsea Building Society has entered an interest-rate swap to convert its recent fixed-rate GBP100 million (USD152 million) offering into floating-rate debt. Deborah Wiffin, treasurer, said the society typically uses interest-rate swaps to convert any fixed-rate borrowings into floating-rate because its retail portfolio consists of variable-rate mortgages. In the swap, the company is receiving 6.25%--the coupon on the fixed-rate bond--and paying a spread over LIBOR, which Wiffin would not disclose.
UBS Warburg is the counterparty on the transaction, as well as the underwriter on the bond offering. "We talked to several people and were most impressed by their professionalism," Wiffin said, but declined to be more specific. The company requires derivatives counterparties to have a minimum credit rating of double A. It will have future senior debt funding requirements through the end of the year, but Wiffin said these depend on the size of its retail funding portfolio, which she said is difficult to predict.