We have expertise in advising clients on a broad range of financing and hedging solutions, including:
1. Leveraged finance, real estate finance, public finance: Advising issuers on interest rate swaps, caps and collars
Ex: Company borrows $1BN from a global bank. We advise on a floating-rate to fixed-rate swap to lock in the all-in interest rate.
2. Non-USD borrowing: Advising issuers on cross-currency swaps, FX options and forwards.
Ex: Company issues €1BN MTN, we advise on a swap from € to $.
3. Non-USD operating income: Advising issuers on rebalancing FX hedges in light of revised (lower) non-US operations
Ex: Company expects income from European operations to decrease by €100MM over the next two years Company is now over-hedged. We advise on closing out part of the € vs $ hedge.
4. Anticipatory hedging: Advising on derivatives to hedge anticipated borrowing costs (e.g., forward-start swap)
Ex: Company anticipates a $1BN 10y bond issue in six months. We advise on a forward-start swap which locks in the 10y rate today, effective six months from now.
5. Convertible securities: Advising on structuring and fair valuation of converts; advising on hedging the dilution risk of the equity (e.g., capped call)
Ex: Company is looking to finance at a lower cash interest cost through a $500MM convertible note issue. We advise on the structuring and fair pricing of the convert. We also advise on a capped call option purchase to mitigate stock dilution risk.
6. Bankruptcy / restructuring: Advising on close-outs or amendments of derivatives
Ex: Energy company files under Chapter 11. Company has previously sold oil for future delivery to a swap dealer under a two-year oil swap on 50 million barrels. Bankruptcy triggers an event of default under derivatives documentation requiring a “close-out” of all swaps. We advise to help the Company to obtain a higher close-out payment from the dealer.
7. M&A: Valuation and risk assessment of target-company derivative positions and structured investments
Ex: Regional bank seeks to acquire assets of a specialty finance company. Target has $2BN of interest rate swaps and options to hedge risk and express rate views. We advise on fair value, liquidation value and risk metrics of the derivative portfolio.
8. Stock buybacks: Advising on alternative financing options, on- and off-balance-sheet
Ex: Company seeks to affect a stock buyback with minimal cash and balance sheet usage. We advise on the structure and pricing of a total-return swap on the Company’s stock.
9. Warrants: Advice on structuring and pricing
Ex: Mid Cap issuer seeks to raise money through a stock warrant. We advise the issuer on structure, pricing and dilution risks.
10. Deferred compensation plans: Advising on equity derivative hedges
Ex: Public company’s deferred compensation plan includes stock options with maturities ranging from 3 months to 5 years. We advise on fair valuation and hedging dilution risks with call options.
