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.