A Canadian Trucking company was concerned about its exposure to floating CAD interest rates. The financial sponsor for this business asked PMC to assist with the hedging process.
- Work with the client to devise a suitable hedging strategy for the business given its industry, leverage and the risk appetite of management
- Perform a review of various instruments ranging from interest rate caps and collars to simple interest rate swaps (the instrument that was ultimately chosen);
- Employ market driven models to effectively price the transaction;
- Assist the business to minimise credit and market execution charges.
Results & Recommendations
By methodically managing the process, we were able to help the client to define and execute the optimal hedging strategy. At the start of the process, four banks were involved but, as pricing tightened, this number diminished and eventually the deal was done with only one bank.