Railway Finance Company Uses FX Swap For Arbitrage

Eurofima, a supranational financing company for European railways, converted its recent USD500 million (EUR496 million) bond offering into euros using a foreign exchange swap. An official said the company is arbitrage-driven and the lead underwriters on its bond deal--JPMorgan and UBS Warburg--presented Eurofima with the structure. The firms were also the counterparties on the fx swap.

The official would not elaborate on the exchange rate of the swap. He noted that it is necessary to use fx swaps to convert any foreign currency-denominated offerings into euros because that is the currency in which the shareholders of Eurofima operate. Eurofima was established in 1956 through a convention signed by 23 countries, whose national railways are the shareholders of the supranational organization.

Officials at UBS declined comment and JPMorgan did not return calls.