Swap transaction assistance

DESCRIPTION

  • The client is negotiating with a financial institution for a EUR 300m floating-rate loan with 18 years maturity.
  • In addition to the loan, the client is required to enter into an interest rate swap transaction.
  • The intervention of Variance is required for supervising the negotiation and execution process with the financial institution.
  • Variance identifies several areas for improvement regarding the swap’s conditions on the draft side letter attached to the loan contract and the swap preliminary term sheet.
  • Variance urges the institution to accordingly modify the mentioned documents, on behalf of the client.
  • During the negotiations, Variance keeps the client continuously informed about any relevant development in the swap market.
  • Ultimately a simulated transaction is performed prior to the actual transaction to ensure maximum transparency.
  • Variance assists the client along the negotiation and execution to ensure best conditions in the swap transaction.

BENEFITS:

  • Prior to execution, the modification of the side letter to the loan contract reduces the interest rate fixed by the swap by 15 basis points, which is equivalent to EUR 3.1 m.
  • Prior to execution, the modification of the swap preliminary term sheet proposed by the financial institution further reduces the interest rate by 2 basis points, which is equivalent to EUR 410k.
  • Variance’s assistance during the execution and its real-time evaluation of bank fees improves the client’s negotiating position and produces a reduction in the interest rate of 3 basis points, which is equivalent to EUR 620k.