UK offshore wind farm refinancing
Hedging and Capital Markets
Infrastructure | London
SummaryChatham 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.
Contact the author
Please complete the form below to find out more about the topics discussed in this case study.
This material has been created by Chatham Financial Europe, Ltd. and is intended for a non-U.S. audience. Chatham Financial Europe, Ltd. is authorised and regulated by the Financial Conduct Authority of the United Kingdom with reference number 197251.
Our featured insights
Term SOFR – daily SOFR divergence
Term SOFR is an index rate frequently used in floating-rate loans and notes. It is published by the Chicago Mercantile Exchange (CME Group) in tenors of one, three, six, and 12 months and reflects market expectations for spot SOFR (an overnight rate) for that given tenor. This piece examines...
Expert Conversation with Matt Henry and Rob Mangrelli
Matt Henry, Chatham's Managing Partner and CEO, met with Rob Mangrelli, Managing Director of Hedging and Capital Markets, and together, they discussed a range of economic topics.
- Post Date
- Mar 31, 2023
Expert conversation with Matt Henry and Jackie Bowie
Matt Henry, Chatham's Managing Partner and CEO, sat down with Jackie Bowie, Managing Partner and Head of Europe. In this interview, Jackie discusses macro and micro economic issues and trends that the U.K. and Europe could be facing going into 2023 and 2024.
- Real Estate
- Post Date
- Feb 7, 2023
Chatham Financial announces CEO transition effective January 2022
Matt Henry named the next Chatham CEO
Refinancing Canadian renewables projects post PPAs
Chatham's Hugh Sutcliffe highlights the pitfalls and advantages that financial sponsors face when considering a refinancing of their renewable energy assets.
Refinancing risks and the potential effect on IRR
Read a recent case study for one of our infrastructure clients, looking to hedge their interest rate exposure via a 35-year interest rate swap.
Interest rate hedging for M25 road refinancing
Chatham advised Connect Plus on the refinancing of the M25 motorway, the largest infrastructure refinance in the UK since 2015.