UK offshore wind farm refinancing
Hedging and Capital Markets
Infrastructure | London
Chatham worked alongside a group of sponsors and their financial adviser to define an optimal hedging strategy for new debt, as well as managing the existing hedges.
- A consortium of three sponsors of a UK offshore wind farm was looking to refinance its stake.
- The sponsors’ existing debt and corresponding hedges were held with six banks.
- The sponsors were planning to refinance with seven new banks.
- Chatham worked alongside the group of sponsors and their financial adviser to define an optimal hedging strategy for the new debt, as well as managing the existing hedges.
- The sponsors were also interested in hedging their inflation linked revenues.
- Conducted a cost analysis for breaking existing out-of-the-money interest rate swaps vs restructuring the existing swaps and novating them to the new hedge counterparties.
- Provided information on the hedge accounting implications of each strategy.
- Recommended the overall optimal IR hedging strategy, which was to novate and restructure the existing hedges.
- Competed credit spreads between the seven new banks.
- Assisted in appointing a sole hedge coordinating bank.
- Benchmarked mid-market levels to ensure fair pricing.
- Chatham evaluated the feasibility of entering into a hedge for the project’s inflation linked revenues.
- The refinancing of the project was successful and achieved the objectives required by the sponsors.
- Smooth financial close and novation of the interest rate swaps occurred on time.
- The sponsors achieved competitive execution, competitive credit pricing and a substantial x-value adjustment (XVA) rebate, negotiated by Chatham.
- Sponsors avoided paying any break costs on the existing hedges.
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