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case study

AIRCRAFT OPERATOR

Background

Client’s aircraft were funded via one month LIBOR securitised notes with a $305m hedging requirement.

The hedging policy in the securitisation required a swap but the arranger had stopped offering hedging.

ISDA contained PP step-in right with PP cooperation required to hedge.

Client had been struggling to replace the hedging for six years prior to our involvement.

An increase in the Fed funds rate was expected.

305m
$305m hedging requirement
200k
$200k of savings in final negotiations
Speak to an expert

William Kloehn

CEO (North America)

E: William.Kloehn@jcraus.com
T: +1 646 640 3619

Our approach

Analysed commercial complexities brought about by legacy ISDA and reluctant PPs.

Generated interest in the hedge opportunity by marketing to several prospective counterparties.

Identified ideal counterparty with sufficient ratings and appetite to offer the required swap.

Worked with chosen counterparty to find solution to remove senior veto for the transaction.

Circumnavigated obstacles put in place by PPs to prevent client hedging as per investor's wishes.

Provided key recommendations in longer term plan to design better hedge documentation.

Explore what we do

Our approach

  • Analysed commercial complexities brought about by legacy ISDA and reluctant PPs.
  • Generated interest in the hedge opportunity by marketing to several prospective counterparties.
  • Identified ideal counterparty with sufficient ratings and appetite to offer the required swap.
  • Worked with chosen counterparty to find solution to remove senior veto for the transaction.
  • Circumnavigated obstacles put in place by PPs to prevent client hedging as per investor's wishes.
  • Provided key recommendations in longer term plan to design better hedge documentation.

Benefits of our approach

  • We successfully sourced hedging in nine months after six and half years without success through our persistence, structuring solutions and management of various stakeholders.
  • Negotiated substantial improvement in pricing in final negotiations and price benchmarking.
  • Our recommendations in the redesign of hedging documentation provided our client with a clear focus on key documentation changes required for more workable future hedging.
  • We achieved savings of over $200,000 in our final negotiations with the counterparty, notwithstanding the main task of sourcing hedging.
  • By successfully hedging in October 2015 our client was protected against rate rises from the Federal Reserve that occurred in December.

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How can we help you

Have you got a question about how you hedge your financial risks, or structure and arrange your debt?

Find out how we can help you by contacting us today.

 

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