JCRA was engaged to advise on the optimal solution to fulfil the mandatory FX and Interest Rate hedging requirement. The debt was split into an onshore CNY tranche and an offshore USD tranche. The requirement was for 100% IR and FX hedging of the offshore tranche.
We gained an in depth understanding of the borrower’s business plan for the asset in order to establish hedging objectives.
JCRA presented a range of hedging strategies to the client. Each strategy was reviewed with the client, explaining the advantages and disadvantages in the context of their hedging objectives.
JCRA recommended the most suitable approach to the client, based on the review of strategies and subsequent discussion.
Pricing was discussed with the lending bank and a reduction in the spread on the chosen strategy was negotiated, with the execution call ensuring this was adhered to by the bank.
The client was clear on the hedging strategies available and the implications in the context of the business plan.
In the context of a trusted relationship the client was able to ask questions of JCRA that, if asked of the bank, could have had pricing implications.
The pricing negotiations saved the client over $300k, which was achieved through our knowledge and experience of the FX market.
In addition to meeting the bank’s credit requirements, the chosen hedging strategy met all the client’s hedging objectives.