John Deere Capital
is considering entering an interest-rate swap to
convert a 10-year USD1.5 billion fixed-rate bond it issued in
mid-March into a synthetic floating-rate liability, according
a representative in the company's investor relations department.
The company opted not to enter a swap at the same time as the bond
sale because it wanted to see if rates would go up. It does not
think rates will rise in the near term, so is now looking at
entering the swap. With three-month LIBOR hovering around 2%, the
company would look to pay a floating rate that was no more than
300-350 basis points above LIBOR before entering a swap. The
finance arm of the Moline, Ill.-based producer of construction and
forestry equipment, would look to enter a swap in which it receives
a fixed rate equal to the 7% coupon of the bond and pays a floating
rate. The maturity on the swap would equal the 10-year maturity on
the bond offering.
co-managed the bond
Derrick said John Deere has used swaps in the
past, but declined to provide further details.
Moody's Investors Service
has assigned an A3 rating to John Deere's bonds,
Standard & Poor's
has rated them A minus.