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Interest rate management
One of the main concerns of a leveraged company is the cost of its debt.
Companies often borrow considerable amounts of debt at floating interest rates. Such an exposure to changing interest rates can:
- lead to increased interest costs,
- potentially cause debt covenant breaches.
As a result a high proportion of these funds require hedging. This can be achieved either prior to or following the closing of the transaction.
As a specialist provider of advice on interest rate hedging PMC is able to:
- develop an interest rate hedging approach that is appropriate for the organisation given its industry, financing and risk appetite,
- assist management to review and understand the hedging proposals made by the lending banks,
- using our market fed pricing models, provide indicative pricing on hedging strategies under consideration,
- orchestrate the process, mechanics and delivery of the final hedging strategy to ensure optimum pricing.
We believe that any hedging strategy must be driven by the business and commercial objectives of the underlying business and not with a view to the future level or direction of rates. Our approach to interest rate hedging is informed by the firm belief that it is not possible to forecast interest rates with any meaningful degree of accuracy beyond what the yield curve tells us from time to time. The market is the best unbiased predictor we have of future rates.
PMC's advisory role, and the fact that we take no financial interest in the advice we give, together with our market fed financial systems, means that clients get impartial and independent advice and have accurate knowledge of market pricing.
