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Case Study

Interest rate hedging advisory and execution

A global payments processing company minimized its exposure to floating interest rates within its term loan and revolver, while maintaining flexibility for future acquisitions, principal paydowns, and other events that could change its capital structure.

Company goals

  • Balance risk reduction with flexibility.
  • Determine the right fixed-float ratio based on goals and peer capital structures.
  • Achieve competitive execution pricing.

Key activities

  • Provided strategic analytics and peer benchmarking.
  • Negotiated ISDA documentation and facilitated KYC requirements with eight counterparties.
  • Conducted four competitive auctions across different bank groups.

Results

  • Locked in efficient market pricing on $1,100mm notional.
  • Achieved competitive pricing, saving the client $500,000 compared with non-auction pricing.
  • Provided live market insight following large rate movements.
  • Diversified counterparty exposure while rewarding multiple banking relationships.

As shown in the table below, Chatham evaluated multiple hedging strategies to aid the company in identifying the best path forward.


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      Disclaimers

      Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal-notices.

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