Why is it an estimate and not an executable quote?

  • It may be possible (and preferable) to defease to an earlier date.
  • It may be possible to use securities other than US Treasuries for this defeasance, which would affect the defeasance collateral cost.
  • This estimate does not comprise a quote for an optimized portfolio of securities. This is particularly important for the defeasance of loans with a maturity greater than 5 years from today due to the availability of allowable bonds in that timeframe.
  • This estimate is subject to market movement between today and the date of your defeasance. Movement in the market could cause this estimate to diverge from actual market conditions.

Can I lock the price of my defeasance collateral?

In brief, yes. Depending on the size of the transaction there are a number of approaches to hedging the price of the collateral that may be feasible, including:

  • A Treasury lock on a representative security to partially hedge the price you can expect to pay at the time of closing.
  • A Forward Starting Cash Settled Swap to partially hedge the price you can expect to pay at closing.
  • Option strategies to act as disaster insurance against major moves in the market.

Please call to discuss the feasibility of these approaches to your particular situation.