A French based company subject to a buyout only had EUR 20m of debt provided by one bank. Underpinned by a lack of competitive tension, the organisation wished to ensure that it had an appropriate hedging strategy in place and achieved a fair price when executing.
- Assess various hedging strategies that have been proposed by the bank and highlighted the advantages and disadvantages of each approach;
- Employ market-driven models to price each hedging alternative, thereby enabling management to make an informed decision about most appropriate strategy;
- Run the models at execution to ensure that the bank quoted a fair market price for the hedging;
- Leverage knowledge of hedging strategies used by similar businesses to advise as to whether or not the bank was adding an acceptable margin to the market price and to illustrate the cost of this additional charge over the lifetime of the hedge.
Results & Recommendations
Despite the lack of multiple potential bank counterparts, we assisted the client to identify and execute an appropriate and cost effective solution to its hedging needs.