Chatham structures and executes the first AMERIBOR interest rate swap transaction
- December 2, 2020
SummaryChatham Financial announced today that it has structured and executed the first AMERIBOR-indexed interest rate swap in a designated hedging relationship on behalf of First Merchants Bank.
Chatham is pleased to announce its part in the structuring and execution of the first AMERIBOR-indexed interest rate swap transaction. As the sunset of the LIBOR benchmark rapidly approaches, Chatham’s Financial Institutions team has focused on assisting our regional and community banking clients with their preparations to manage risk with alternative reference rates. Many financial institutions recognize the need for a credit-sensitive benchmark to co-exist with the nearly risk-free SOFR index to manage the asset/liability management risks they face. From the leading edge of the debt and derivatives markets, Chatham helps our clients manage this difficult transition using our deep experience in the relevant economic, accounting, and regulatory considerations.
“One of Chatham’s purposes is to bring transparency to markets and to partner with our clients to help meet their objectives,” said Clark Maxwell, Chief Executive Officer of Chatham Financial. “We are always excited to bring our deep hedge accounting and transaction structuring expertise to help solve new and difficult problems on behalf of our clients.”
While the underlying transactions that are used to derive the AMERIBOR fixings have consistently grown since its introduction, the derivative markets based upon the rate are still in the nascent stages of development. This first transaction serves as a strong proof of concept that as this market continues to develop it can be an important risk management tool for financial institutions to manage loan and funding repricing risk.
“The AFX AMERIBOR® swaps product offered the perfect transaction terms to meet our needs,” said First Merchants Bank President and CEO, Michael Rechin. “As a Founding Member of AFX, First Merchants Bank is pleased to be the counterparty for the first AMERIBOR interest rate swap.”
As the largest independent hedging advisor in the financial institutions space, Chatham has decades of experience in assisting regional and community banks solve complex risk management problems.
“Markets and risks are constantly evolving, and the highest performing financial institutions have always sought to manage their risks with the most flexible playbook they can. It is humbling to play a small part in helping to develop this market for their benefit,” said Todd Cuppia, Managing Director of Chatham’s Balance Sheet Risk Management practice.
About Chatham Financial
Chatham Financial is the largest independent financial risk management advisory and technology firm. A leader in debt and derivative solutions, Chatham provides clients with access to in-depth knowledge, innovative tools, and an incomparable team of over 600 employees to help mitigate risks associated with interest rate, foreign currency, and commodity exposures. Founded in 1991, Chatham serves more than 3,000 companies across a wide range of industries — handling over $750 billion in transaction volume annually and helping businesses maximize their value in the capital markets, every day.
About First Merchants Corporation
First Merchants Corporation is a financial holding company headquartered in Muncie, Indiana. The Corporation has one full-service bank charter, First Merchants Bank. The Bank also operates as First Merchants Private Wealth Advisors (as a division of First Merchants Bank). First Merchants Corporation’s common stock is traded on the NASDAQ Global Select Market System under the symbol FRME. Quotations are carried in daily newspapers and can be found on the company’s website (www.firstmerchants.com). FIRST MERCHANTS and the Shield Logo are federally registered trademarks of First Merchants Corporation.
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