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.
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
Chatham's Hugh Sutcliffe highlights the pitfalls and advantages that financial sponsors face when considering a refinancing of their renewable energy assets.
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.
Chatham advised Connect Plus on the refinancing of the M25 motorway, the largest infrastructure refinance in the UK since 2015.
Chatham was advising the largest UK PPP infrastructure project in 2019, connecting the London Blackwall Tunnel to the Royal Docks industrial area.
On November 26, Chatham Financial accepted the inaugural Hedging Adviser of the Year award at the 2020 Risk Awards. This new award recognizes excellence in providing independent advice to derivatives users.
An interest rate swaption is an option that provides the borrower with the right but not the obligation to enter into an interest rate swap on an agreed date(s) in the future on terms protected by the swaption.