Real Estate Case Study: Debt Ratio Our Client: A public real estate company specializing in asset management in the hospitality sector. Situation: Our client had paid down a significant portion of their floating rate line of credit, leaving them with a fixed/floating rate debt ratio higher than they desired. With hotel assets essentially re-pricing daily, the client wanted to increase their floating rate exposure on the liabilities side to better match the characteristics of their assets. Summary: We discussed entering into a receive-fixed swap to rebalance their fixed-floating mix. A secondary benefit of this strategy was that it allowed them to reduce their current interest expense due to the steepness of the yield curve; the receive fixed swap synthetically transformed a higher fixed rate obligation into a lower floating rate obligation, based on an historically low current LIBOR setting. Because…

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Managing the foreign currency rate changes that can impact returns Investors who purchase foreign assets run the risk that movement in local currency rates can reduce the underlying value of their expected/projected return. Many investors seeking to reduce such risks are wary of making large upfront cash outlays as well as potential breakage costs. Chatham Financial can help balance these concerns so that the risk is minimized most efficiently. Benefits of Chatham Foreign Currency Hedging Services Holistic approach: Chatham works with private equity investors to define the right strategy and instruments to support it. Our risk analyses help determine what percent of the investment to hedge, as well as the tenor, timing, and instruments needed to offset currency risks. From strategy and execution to reporting, Chatham analyzes and assesses risk exposure as well as structures and reviews policy to identify…

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Mitigating risk and avoiding dead deal costs When a private equity investor agrees to purchase a company in a foreign currency rather than the currency in which the debt or equity is funded (e.g. investing equity from a US Dollar denominated fund in a JPY asset or raising debt in USD for a CAD investment), the fund runs the risk that, prior to closing, foreign exchange (FX) rate movements will require additional funding. Many investors prefer to lock in the specific equity check required at the time of signing to avoid any surprises at closing. Deal contingent FX hedging allows investors to lock in a specific FX rate. It also allows them to walk away with no strings if the underlying deal does not close. Similarly, the high amount of leverage in these deals also prompts investors to take advantage…

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Impact on Equity REITs Impact on Equity REITs Guide

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Impact on Private Equity Funds Impact on Private Equity Funds Guide

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